New tenant fee shift ‘could see landlords increase rents’

The government’s new ban on tenancy fees could result in landlords increasing rents in a bid to absorb the burden of fees that are now being put onto the property owner, rather than the tenant.

This month saw the government’s Tenant Fees Act (English letting fees ban) come into play, which is not a banning of fees outright, but a shift from tenants to landlords – the burden of fees being put onto the party with the choice of agent, or onto the agents themselves if they chose to absorb the fees on behalf of clients.

However, RICS, the professional standards body for the real estate sector, warns there is a possibility that landlords will pass the fees on to tenants by increasing their rent.

Tamara Hooper, RICS policy manager, 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 3% 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 Tenancy Fees Act, RICS is now encouraging both landlords and tenants to become familiar with the only fees (apart from rent) that can be charged to tenants which 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.

Hooper adds: “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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