Tenants fees ban will cost landlords £82.9 million
Thursday 10 May 2018
The new ban on tenants fees will cost landlords £82.9m in the first year it has been revealed, with letting agents paying £157.1m.
The figure was included in the Government’s official response to the HCLG Select Committee’s report on the draft Tenant Fees’ Bill.
An impact assessment says: “The main costs fall on landlords and letting agents as a result of the ban on tenant fees.”
It goes on to state that in the first year of the policy, it is estimated that the cost to landlords will be £82.9m whilst the cost to letting agents is estimated to be £157.1m.
The impact assessment goes on to say that these estimate figures include ‘pass throughs’, for example by letting agents charging landlords higher fees.
The concerns about the tenant fee ban costs being passed on to landlords was raised by RLA Policy Director David Smith, when he gave evidence at the CLG Select Committee in January.
The Government has accepted the Committee’s recommendation to amend Schedule 1, paragraph 1 (6), to make sure landlords don’t increase the first month’s rent in a bid to recover the fee.
The Government notes: “Landlords will only be able to charge a varied level of rent if this has been agreed with the tenant subsequent to the tenancy being entered into.
"Government has been clear that the intention of this paragraph is to prevent landlords and agents from inflating the first months’ rent as a means of circumventing the ban.”
On deposits, the Government has rejected suggestions put forward by the Select Committee, to lower the cap on deposits from six to five weeks, noting that ‘a depsoit of six weeks of rent will be an upper limit and not a guideline'.
They noted that they expect landlords should consider on a case by case basis the appropriate level of deposit to take and will provide guidance to this effect.
The deposit is also only retained by the landlord in instances where the tenant defaults on their obligations under the tenancy.
However, the Government has accepted the Committee’s recommendation, that “The Government should amend Schedule 1, paragraph 3, and Schedule 2, to clarify that holding deposits can be paid to letting agents as well as landlords.”
The Bill will now move on to its second reading, which will be the first opportunity for MPs to debate the main principles.
Richard Truman, Head of Operations at Simple Landlords Insurance, added: “It’s unlikely the fee ban can be stopped, but landlords and letting agents should be talking to their local MPs about its impact, and how that’s going to impact local businesses – and ultimately the local housing market.
“The truth is the people who will really end up paying could well be tenants, as rents increase over time and service levels decrease as a result.
“Rolling with the market changes is something we know landlords can and are doing – and being involved in the changes and helping to shape them is key.”