One month advance rent rule ‘will hit self-employed’
The Association of Rental Living warns the Government that preventing landlords and letting agents from collecting more than a month's rent at the outset of a tenancy will exclude self-employed people and students.
Self-employed workers and students may be excluded from the PRS by the Government’s move to restrict rent collected in advance of a tenancy to one month.
That’s the warning from the Association for Rental Living, which also says the measure may hit the build-to-rent sector.
Latest hurdle
The Renters’ Rights Bill passed its latest hurdle in Parliament as MPs gave it a third reading and passed it onto the Lords.
A series of Government amendments to change the Bill were passed, which included preventing landlords and letting agents from asking for more than one month’s rent at the start of a tenancy.
The greatest impact of these ‘unintended consequences’ will be felt by the self-employed and retirees.”
Brendan Geraghty, CEO at the Association for Rental Living (ARL), says: “We are concerned that the new amendment to the Renters’ Rights Bill to restrict rent in advance … creates another barrier to entry for those already on the margins of the private rented sector.
“The greatest impact of these ‘unintended consequences’ will be felt by the self-employed and retirees, who are often able to make lump-sum payments, but cannot provide sufficient proof of income to satisfy landlords.”
Students impacted
He says it will also impact overseas students and professionals who are unable to pass referencing checks.
“This measure would also prevent students from paying their rent in line with their student loan (in three tranches across the academic year), and may lead to an increased number of students falling into arrears and facing financial pressures,” he says.
“The uncertainty caused by a lack of security of tenure will have a negative impact on the confidence of investment to build much needed rental homes.”
The problem with banning creating fixed term tenancies with all AST’s being monthly periodic tenancies is that any rent taken in advance of more than a month will be deemed security for non-payment of rent i.e. a tenancy deposit that exceeds 5 weeks rent and wont be protected as a tenancy deposit. That is unless the legislation addressed that head on and made provision to take rent in advance.
If the government has given it any thought they will be expecting the industry to step in and offer products for tenants to take out that will give security to the landlord rent is affordable as well as make it illegal to disseminate against atenant who is being supported by such a product. That will come as a financial cost to the tenant purchasing such products (effectively a tenant fee) so most likely the government will put that cost on the landlord too.
Tenants not being able to pay more than one month’s rent in advance is nonsensical and what is this new law based on? More & more private landlords will sell their properties because these changes in law will push them over the edge, so the shortage of properties available will increase, pushing rents up further. Has no one in the government thought about students and tenants that come to the UK from abroad?
Totally agree Andrew. They are closing down many avenues to tenants who dont fit the standard requirements. Like self employed, new arrivals from overseas etc and that’s before you consider the change in set up of ASTs. They are not considering the wider picture. Who would be a landlord when there is a risk you cant get your property back
And those with bad credit, elderly people who rely on private rented sector and people on disability benefits, with pets, anyone the landlord can’t trust to maintain a long-term tenancy.
I don’t see how, if a car finance firm can require a larger deposit based on risk, why can’t landlords in the running of their business? It’s going to be an absolute mess.