As you may know by now, the UK Government has decided to make it illegal for landlords and letting agents to charge tenants any ‘fees’ in connection with letting a property, except for a very limited number of charges for things such as rent defaults, lost keys and other breaches of or amendments to their contract.

For tenancies commencing after June 1st 2019 we will no longer be able to charge tenants ‘referencing’, ‘contract’’ or ‘check-in / check-out’ fees. This applies to ALL landlords and ALL agents in the UK and the penalties for breaking the law are quite severe.

Our company stands to lose something in the region of 20% of turnover because of this ban and clearly that is not sustainable unless we recover at least some of it from our landlord clients. We have no choice therefore but to reluctantly pass some of those costs on as well as accepting some inevitable loss of income to the business.

As far as the Government is concerned it is the landlord that chooses their letting agent and therefore the landlord who should pay for their services; That is fair enough. Over the years however these ‘tenant fees’ have crept up and crept up as some unscrupulous agents use them to keep landlord costs artificially low and therefore appear ‘cheaper’ than their competitors to achieve more instructions. We have never engaged in this aggressive strategy and so thankfully the loss of income that we have to deal with is perhaps less than many others. However it is still substantial. The ban will however level what has been an uneven playing field going forward and will therefore establish the ‘true’ cost of using a professional agent.

I am, however, extremely sensitive of the needs of my clients and that recently landlords have not been treated too kindly by the Government or the HMRC. We therefore plan to ensure that we maximise our clients' returns by keeping rents at the level they should be whilst minimising void periods. Where we can look to fairly increase rents within tenancy we will be actively recommending that to you as we go forward.

Once the fee ban is in place we will need to pass some of the referencing cost to our landlord clients as the Government intends. The plan is to add a charge of £75.00 per applicant for the referencing process with a secondary charge of £25.00 for ‘partially referenced’ applicants. What is meant by this is as follows;

Fully Referenced – Treated as the main income source and therefore referenced to ensure affordability along with credit checking, photo ID and other associated background checks to confirm suitability.

Partially Referenced – An associated tenant on whom we do not need to rely financially and so they will simply be credit checked and formally identified to comply with Immigration Act requirements.

In most cases there is a ‘lead’ applicant and a ‘secondary’ applicant so the cost should be around £100.00. It is of course also worth noting that this only happens when the property is marketed and let to new tenants.

Adding these extra charges will certainly NOT make up our losses sustained through the Tenant Fee Ban and so there are some other general changes that we need to make to try and balance the books. These are;

Deposit Protection Fee – Our Terms of Agency allow for a charge of £35.00 to protect the tenant’s deposit which is charged at the outset of the tenancy and annually thereafter. We have been quite relaxed about imposing this charge over the years but we must now ensure that it is charged as per the terms. We are now paying over £5000 per annum to be part of the TDS protection scheme and we must deal with that cost.

Rent Protection Insurance – We ceased providing Rent Protection Insurance free of charge many years ago although a small number of landlord clients who have been with us for a long time still receive it. We will no longer be able to provide this and from 1/6/19 any rent protection insurance will be optional and chargeable at the prevailing rate advised on an ad hoc basis.

Tenancy Renewal Fee – Throughout the existence of the business we have never charged landlords for the renewal of tenancy agreements. It is a cost that we have always passed on to the tenants even though it benefits both parties. Many agents charge both landlord AND tenant! Obviously this is going to have to stop under the new law. So, as and when tenancies are renewed there will be a charge to you of £75.00 for the negotiation, drafting, signing and copying of said tenancy renewal. I hasten to add however that tenancies DO NOT need to be physically renewed when they expire and can continue as a Statutory or Contractual Periodic Tenancy with no cost to either party. You will be given that option every time a fixed term written tenancy nears its’ end. The cost of the initial written tenancy will be covered within the usual Letting Fee.

Overall, I expect us to be able to lessen or even ameliorate the effects of the Tenant Fee Ban as far as my clients are concerned even though that means a temporary reduction in our own income. Retaining and repaying the loyalty of my clients, some of whom have been with me for many years, is absolutely paramount.

The Tenant Fee Ban is an unprecedented change to the way we manage the costs of running our business. We really do hope that our plans will be considered fair and reasonable and please rest assured we are sharing the cost of these changes with you.

After the inception of the Tenant Fee Ban we will be issuing new Terms of Agency whenever a property requires letting or re-letting.

Andrew Strevens - Managing director