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It seems a very long time ago that I warned moves to remove the fees landlords charged to prospective tenants was on the horizon.
I have to be honest, as time went on, I began to think I had worried unnecessarily, that Government realised that the (generally) fairly reasonable fees landlords charged were justifiable.
I was aware that some landlords or agents charged extortionate fees. Action taken against them would seem more proportionate, but of course that middle course is never adopted, it is all or nothing. So as from 1st June, all landlords are now forbidden to take any payment for taking references, holding fees, drawing up tenancy agreements or any of the other things which come under the heading ‘Administration fees’.
The CAB and Shelter are doubtless congratulating themselves; another victory for them on behalf of the hapless tenant. I think this will be another piece of legislation that bounces back and hits them in the rear.
Private Sector Landlords already feel themselves under attack with the threat of the section 21 route to end tenancies being removed. Private tenants will find it more difficult to persuade a landlord to take them for what could be a minimum of 3 years and yes, I know, if they fall into arrears or there are issues of anti-social behaviour they can be evicted, but it is amazing how bad a tenant can be without creating a sufficient ground for eviction.
The only thing that has persuaded some landlords to take a non-working tenant, or one who is working but reliant on benefits, is that they can ask for a good deposit, rent in advance, and have the cost of credit referencing and obtaining references paid by the tenant, eager to obtain what they perceive as a good property.
Now landlords will have no indication whether a particular prospective tenant has taken steps to prepare themselves for obtaining a new flat, because they will be asked for nothing but the deposit; which they may obtain over a matter of days or weeks by borrowing. This does not bode well for the future tenancy, as they will have to repay the loan and may very quickly fall into arrears with the rent.
As I have advised over the years, make sure you know exactly why you were making an administration charge – not because this will help you escape the legislation, but so you can make a reasonable additional (though unspecified) charge in the rent.
For example, a credit reference will probably cost in the region of £15-£20 each. Over 6 months, this would amount to £0.79 per week; a tenancy agreement template is available from your landlord association, accreditation scheme, or indeed this website. The charges for this are therefore minimal; likewise printing an inventory.
Perhaps you feel this would add £2.00 a week to the rent. Add it, but then make sure you collect it. If you don’t, you have proved that your administration charge was unreasonable. I know many landlords who accept without question the amount paid for housing costs through Universal Credit, often less than the rent figure actually is. Make sure your tenants know they have to pay, or an arrears situation will accrue.
Landlords should not shortcut what are their usual procedures for finding a tenant, despite the fact they cannot charge fees for this in advance.
This legislation is intended to help tenants – it won’t.
For advice on buy to let issues – Ask Sharon