After a period of increased costs because of tax, stamp duty and mortgage relief changes, the year ends with the news that landlords and letting agents could face fines of up to £30,000 for charging tenants any fees above rent. This is according to government proposals featuring the publicised ban on tenants’ fees. The government estimates that tenants could save an average of £327 when they start a new rental agreement without fees. However, it is also possible that landlords or rental companies could simply put up their rents slightly to offset the costs, if the letting agents try to push their fees on to them.
However, half of all landlords believe the agent will pass on the costs to them when the bill becomes law. A survey by start-up, Reposit, showed that one of the most common unexpected costs for landlords is an increase in letting agent fees. Repairs and renewal fees also feature, while one in three landlords say they have had to pay for costs they weren’t expecting. However, increased fees were not the main reason given for landlords leaving their agent. Of the 41% who had changed agents, only 11% said it was due to higher fees. Of those surveyed, 61% said customer service and 26% said poor property care had been the reasons for switching agents. The increased costs of being a landlord, such as increases in stamp duty and reductions in tax breaks, are forcing about one in four landlords to shop around for cheaper agents. Another option is to take this extra workload on themselves, by using software and apps to keep on top of the administrative duties.
Also, under the new proposals, landlords and their agents will not be able to make any charges over and above the rent. However, they will be able to take security deposits capped at six weeks’ rent, holding deposits capped at one week’s rent and any tenant default charges. Until now, tenants often had to bear the cost of letting agents carrying out services such as taking up references or drawing up an inventory, even though those agents were also in the employ of landlords. The new ban will also be extended to third parties, which means agents cannot expect tenants to pay for another company to conduct the inventory, for example. Anyone who does not comply with the new rulings could face an initial fine of £5,000, enforced by Trading Standards. If a further breach is committed within five years, then they could be fined £30,000 or face prosecution.
The new regulations also aim to make the fees and workings of letting agents more transparent. All agents will have to post details of their fee structure and regulatory oversight on online listing websites, such as Zoopla and Rightmove. All letting agents will also have to be regulated, which is not the case at present, although many reputable ones are. A draft bill will be published, to be discussed by MPs before it becomes law.
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