Two Sides to the Tenant Fee Ban Controversy

As of the 1st June 2019, Tenants will be able to know exactly what a tenancy will cost them, without any of the extra administration charges. The aim of the Act is to reduce the costs that tenants face before, during, and at the end of the tenancy with a view to redressing the balance between tenants and landlords and to deliver a fairer, qualitative, and more affordable private rented sector (PRS).

What does this mean for Tenants?

  1. No tenancy administration fees
  2. No third party tenant referencing costs
  3. No end-of-tenancy inventory costs
  4. Security deposits capped at a sum equal to 5 weeks rent for tenancies with an annual rent of less than £50,000
  5. Security deposits capped at a sum equal to 6 weeks rent for tenancies with an annual rent in excess of £50,000 but less than £100,000

With the PRS accounting for over 21% of households in England in 2017, the ban has been widely acclaimed and welcomed for saving renters an average of £272 per tenancy on administration costs. But the wider reaching repercussions for landlords, agencies and the industry as a whole may not be fully revealed for some time.

It is fair to assume that the ensuing financial burden will likely fall on landlords and/or estate agencies, in which case other factors must be taken into consideration. Agencies will be left with one of two options: either absorb the costs, which is ironic as many struggling agents had introduced these fees to survive the property crash of 2008 in the first place, or charge them to the Landlords.

In the event of the latter, adding in the ever decreasing mortgage interest tax relief Landlords can now claim (only 25% in the current financial year, reducing to 20% thereafter) and the increased levels of Stamp Duty Land Tax for both second and additional home owners, prospective Landlords may be less inclined to enter the PRS and existing ones to retain their interest in it. Not to mention those international buyers who may incur an additional 3% of SDLT.

This could result in fewer properties coming into the private rented sector, therefore a smaller pool of available listings, greater competition and dare we say it; higher rental prices for Tenants?!

Time will tell…

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