On June 1, the Tenant Fees Act comes into force. The Act aims to reduce the costs many tenants face when they rent a property, as well as extra costs incurred during and at the end of a tenancy. But there are concerns that banning letting fees could have an unwanted knock-on effect.
Landlords are being advised to contact their letting agent (if applicable) to find out if the agency plans to increase their fees in a bid to make up for the shortfall when they can no longer charge tenants.
Contact Your Letting Agent
“If landlords haven’t heard anything from their agency yet, it is worth making contact as soon as possible, to understand if there are likely to be additional costs and if so, what these will amount to,” says Andrew Turner from the Commercial Trust.
Since letting agencies will lose a significant amount when the Tenant Fees Ban comes into effect, there is every possibility that many of them will seek to recoup the money by increasing fees charged to landlords.
Do a Cash Flow Forecast
Check to find out if your letting agency is putting up their fees. If they are, do a cash flow forecast to see whether you can absorb the increase.
Remember that letting agent fees are tax deductible, so you can claim them as an expense on your tax return. If an increase in letting agent fees is going to affect you, then decide if putting up rents is your only option.
Remember, if you do need to increase your rents, you must give your tenants notice of a rent increase. Tenants who pay monthly need one months’ notice. If the tenancy is a yearly one, as is often the case for student lets, then six months’ notice is required.
Letting Agents are Under Pressure
The lettings industry is increasingly under pressure in a challenging marketplace. Many smaller lettings agencies have merged to create larger businesses and streamline their costs. Nevertheless, not being able to charge tenants fees will hurt them.
It is highly likely that many will start charging landlords more for a managed service. And with landlords under pressure on all sides, with the loss of mortgage interest tax relief, increased Stamp Duty on second and subsequent homes, and now planned reforms to tenancy evictions, it is inevitable that some landlords will have no choice but to put up their rents.
Tenants Facing Rent Increases
The irony is that this will affect the very people the Act is supposed to help – the tenants. So, while tenants will no longer be forced to stump up unreasonable fees, they will probably be looking at increased rents.
Are you planning to increase your rents to cover the cost of extra letting agent fees? Let us know in the comments section or connect with us on social media.
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