Home » Guest Blogs » The tenant fees debacle

The tenant fees debacle

The ban on tenant fees is, says Carl Burgess, Director at Winkworth Shepherd’s Bush, detrimental to those the Government is actually trying to help.

Carl Burgess

Letting Fees Ban image

Having worked in lettings for 20 years, I take pride in my honest and progressive attitude to the industry and am always looking for ways to make improvements for landlords and tenants. I was vocal in campaigning for transparency in tenant fees 10 years ago and I have been a tenant on three occasions, as a single guy and a family man with five children. I have also been a landlord for 20 years, so I have a balanced and informed view from both sides of the fence when it comes to the proposed Tenant Fee Ban.

The ban is now inevitable. The industry, including the professional bodies that should govern and guide us, had its chance to make a case but did nothing.

The proposed legislation states that any type of fee will be banned, including inventory costs, referencing fees and guarantor charges. On top of that, it restricts the landlord’s ability to ask for more than six weeks security deposit.

VULNERABLE TENANTS

Presently, if a tenant is unable to prove that they are suitable – i.e. students, tenants with pets, self-employed tenants with difficulty proving income, poor credit history, no previous rental history, affordability, or simply someone starting out in their first job – we may ask for a guarantor. This type of proposed tenancy creates a great deal of additional work and time so, reasonably, agents tend to pass this cost on to the tenant.

The industry, including the professional bodies, have done nothing.

Furthermore, when renting to individuals of higher risk, landlords may request the additional protection of a higher deposit – sometimes seven or eight weeks depending on the level of risk. This money, of course, remains the tenants’ and is protected within one of the Government approved schemes and returned at the end of the tenancy. Sometimes, when two or three tenants are chasing the same property and one offers a more risky covenant, that tenant may also offer a higher rent.

Carl Burgess, Winkworth, image

Carl Burgess

What concerns me is that this legislation will mean these tenants who lack a straightforward background – often the most vulnerable tenants – will face difficulties finding rental accommodation. Why would a landlord accept additional risks without additional security? They wouldn’t.

So tenants may find themselves pressed into paying higher rents or forced to take poor accommodation, creating a ghetto subculture for the fringe tenants.

What’s more, I have found that most applicants that appear to be higher risk are normally happy to pay an increased security deposit if a landlord will accept them.

INVENTORY SERVICE

Another issue is the confusion surrounding fees for ‘Inventory Service’.

Many Government-introduced deposit schemes insist upon a fair assessment of damages being made at the end of the tenancy – this cannot happen without an inventory. It is accepted that the best solution is for a professional independent inventory clerk to make this assessment at the beginning and end of the tenancy – transparent, fair for all parties. The costs are usually split, with the landlord generally paying at the beginning and the tenant paying at the end. Although it’s not clear in the legislation, it seems to suggest that asking the tenant for any contribution towards the inventory would also be illegal.

This could spell disaster for the industry, resulting in landlords being reluctant to pay the entire cost of the inventory and leading to greater disputes at the end of the tenancy.

In fact, the very nature of inventory clerks could change as their only client would be the landlord and thus they would lose their independence. Some landlords may even seek out those that would best represent their own interests to the disadvantage of those that the Government seeks to help.

NO INDUSTRY REPRESENTATION

Further to these issues, nobody who could reasonably be considered an industry expert was present in the oral evidence meeting for the Draft Tenants Bill.

‘Shelter’ was invited, yet no one else from the industry is represented – a kangaroo court from which ill-informed decisions are the only possible outcome. This ban was born under a bad star and ridiculous examples used to push through an ill-considered and damaging piece of legislation.

AND FINALLY

Unfortunately, what we have is the simple economics of supply and demand. With the ban in place, tenants may temporarily have more money in their pockets, but I suspect that there will be more instances of landlords being left out of pocket by absconding tenants, leading to an increased cost on landlords, resulting in landlords leaving the market, with the inevitable consequence of rents increasing. Plus, those long-staying, loyal tenants will feel the effects far more than the tenant who moves around every year or so as landlords increase their rents to mitigate their losses.

It’s a mess – you have been warned.

What's your opinion?

Please note: This is a site for professional discussion. Comments will carry your full name and company.

This site uses Akismet to reduce spam. Learn how your comment data is processed.