Saturday, 24 August 2019

Tenancy fees ‘ban’ could see rents rise

Tenancy fees ‘ban’ could see rents rise

THE government’s new ban on tenancy fees could result in landlords in London increasing rents in a bid to absorb the burden of fees that are now being put on to the property owner rather than the tenant, according to the Royal Institute of Chartered Surveyors.

This month saw the government’s Tenant Fees Act (England) come into effect. This does not ban fees outright, but brings about a shift from tenants to landlords.

The burden of fees is now chargeable to the party with the choice of agent — or the agents themselves if they chose to absorb the fees on behalf of clients.

However, RICS has warned there is a possibility that landlords will pass the fees on to tenants by increasing their rent.

RICS policy manager Tamara Hooper said: “The aim of this tenant fee shift is to create a better market with more transparency for the tenant at the outset, with fees now hopefully seen as business expenses either at the landlord or agent level.

“RICS welcomes any attempt to improve standards and consumer outcomes. However, it must be done in a proportionate way.

“We don’t want this new fee ban to result in more landlords exiting the market — having also faced tax and regulatory changes within the sector over recent years — as this could result in a further shortage of available properties to rent.

“But at the same time, our research suggests that prior to the tenant fees ban, rents were expected to grow by an average of three per cent per annum over the next five years — due to demand outstripping supply — and the risk is this could now prove to be an underestimate as the burden on buy-to-let investors continues to grow.”

In light of the new act, RICS is encouraging both landlords and tenants to become familiar with the only fees — apart from rent — that can be charged to tenants.

These include:

• A refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above.

• A refundable holding deposit (to reserve a property) capped at no more than one week’s rent.

• Payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher.

• Costs associated with early termination of the tenancy, when requested by the tenant.

• Payments in respect of utilities, communication services, TV licence and council tax.

• A default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement.

Tamara Hooper added: “We are encouraging the government to update their recently released ‘How to Rent’ and ‘How to Let’ guides, which are now both outdated in terms of fees.”

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