It is no secret that the private rental sector has taken a bit of a buffeting lately due to new legislation being introduced.
Until about 2007 the sector was only lightly regulated which made investing in property an attractive pension option. Since then however, there has been a steady flow of legislation that has placed landlords and letting agencies under more and more pressure.
What started off as good, sound practice, to level up the playing field for landlords and tenants, has turned into a steady stream of regulations. Appearing to have been put in place for no other reason than to catch out the unwary landlord or agent, rather than with the intention of making things fairer on both sides.
At a time when the nation faces a shortage of housing it seems to fly in the face of reason to put more obstacles in the way of attracting and retaining private sector landlords.
The latest National Landlords Association (NLA) reports that in 2017, the sector lost 46,000 private sector properties – the biggest fall since 1999.
The Tenant Fee Ban.
The latest raft of regulations came into force on 1 June 2019 with the introduction of the Tenant Fee Ban (as detailed in our recent blog article https://foskettandrodgers.co.uk/).
This ban entails a total ban on charges to the tenant. Therefore, neither landlords nor agents can charge for such things as:
– inventory costs
– check in and / or out costs
– stipulate a property must be professionally cleaned
The full ramifications of the Tenant Fee Ban are yet to be felt but will it mean cheaper rents for tenants?
The Knock-On Effects.
It has been estimated that agents stand to lose about £3million in income so it stands to reason that they will try to recoup that income, or part of it, via another avenue.
It is too soon yet to have hard evidence of the fallout from this legislation but the NLA has observed that some agencies have begun to target landlords, to recoup some of their losses, by increasing their management fees.
Local research indicates that some of these percentages have been increased to as much as 18%, and uplift on invoices (for third party services) have risen by as much as 10%.
If landlords are going to be hit with higher fees, a logical reaction from them will be to pass these onto the tenant, by way of higher rents.
It has been quoted in the industry media that when this last raft of measures starts to bite, it will make it harder for the smaller agents to survive. We think, however, the opposite is true.
The smaller agencies will have the flexibility to bend and stretch to accommodate the changes whereas some of the larger corporates won’t be able to react so quickly. They generally need time to upgrade systems and cascade changes down to staff and branches.
In conclusion, the more savvy of the agents, both big and small, will swallow some of the costs themselves. Foskett and Rodgers, for example, have always paid for tenant referencing and have never uplifted invoices, which keeps the costs to landlords down.