More trouble ahead for landlords?

Mike White, Martin & Co (Image: Archant © 2009)

Too late, the government already have taken a chunk out of landlords what with their tax changes etc. And, now they've published their draft bill to implement a universal ban on charging tenant fees.

For regular readers of my column, you will know that I have banged on at length about this and you're probably thinking, 'Enough already, how many more times are you going to tell us?' Well, I'm sorry to bore you but now the bill has been published, following the various consultations that they've had to do, I thought I'd just give you a thumbnail sketch of the details.

In a nutshell the bill makes it illegal for a letting agent, landlord or third party to make a charge to a tenant other than for rent and deposit. Deposits are to be capped at six weeks' worth of rent, which is fine if you're a landlord used to only having a months' worth but for Martin & Co Norwich clients who are used to 1.5 or 2 months' worth, they will be faced with an unwelcome reduction. As the bill is currently drafted it is our interpretation that tenants will no longer be able to be charged for the check in/check out fee, their referencing, administration in setting up a tenancy or contribution towards the cost of renewing a tenancy. So, in summary, an outright ban on all fees - leaving a cost gap for services provided. There was speculation previously that landlords could perhaps recoup the inevitable price hike they will see from their agents, by charging a premium rent for 1 month during the tenancy but the Government will be outlawing that as well.

The one slightly brighter note is there has been a recognition, with no fees to pay, tenants could make multiple applications for a number of properties without a commitment to any of them. Accordingly, there is a provision for agents/landlords to take a holding fee equivalent to a maximum of one weeks' rent pending references etc being completed. This will become payable to the landlord in the event that all is not well with the tenant's bona fides and will compensate them for holding the property for said failed tenant.

Further pressure on letting agents will come in the form of the Government's simultaneous announcement that it will link the tenant fee ban, introduction of mandatory Client Money Protection (CMP), new minimum training standards and a requirement to belong to a recognised body. While the fee ban makes no sense whatsoever and will actually increase the overall costs of renting to tenants over time, implementing all of these measures in one go does have a lot of merit. It will give agents a chance to fully evaluate the total cost impact on the business and enable them to increase their prices to landlords in a single go, rather than dripping these in over a longer period. In turn, that will enable landlords in conjunction with their agent to work towards increasing rents to a level where they are properly compensated for the extra fees incurred.

Also, and ultimately this is important for landlords, a Big Bang approach should sort out the weak and/or less scrupulous agents and put them where they deserve to be – in the bin! There will be a raft of these around the Country and indeed quite a few in Norwich that won't pass muster. Perhaps they won't qualify for CMP, can't pass the training or fail to be accepted by a recognised body. Or, maybe they won't be able to afford the extra costs of being properly regulated – even in a world where we accept things at face value, it never ceases to amaze me how, hitherto, agents could get away with setting up on day one and use the marketing strap line of 'lettings specialists' when actually they barely know how to spell their own names.

At Martin & Co in Norwich, we're going to consult with our clients over the coming months and, although the changes won't be implemented (in my view) until around April/May next year at the earliest, we'll have formulated together the best response to all of this. One thing our clients won't have to concern themselves about is that we already meet and exceed the quality standards being contemplated by the new legislation.

You can contact Mike White at Martin & Co, sponsors of this article, on 01603 766860 or visit www.martinco.com/letting-agents/branch/norwich.