How banning tenants application fees could cause chaos...
The Tenants rents could rise by an average of £264.00 per annum if Ed Milliband forces through the ill-conceived amendment to the Consumer Rights Bill in which MPs will be asked to vote on banning fees charged by letting agents to tenants.
MPs will be voting on at Tuesday's session and if the amendment goes through a reduction of properties available for rent through the private rental sector is almost a certainty.
Monthly rents could increase by on average £264.00 per annum per tenant and an overall increase in rental payments of £23,750,000 per annum across the UK.
Less stringent checks on tenants by letting agents will result in thousands of landlords not receiving rent which they are legally entitled to. Consequently this will make the properties uneconomical to rent and the landlord could end up selling and taking the property off the rental market.
If administration fees are banned there will be nothing to stop applicants making multiple tenant applications, this will cause delays, landlords will think they have found a tenant and then that tenant will rent another property without a second thought. Landlords voids increase and then the landlord, fed up with not collecting rent leaves the market.
The voting for the proposed amendments could mean the following:
The Bill will apply across the whole of the UK, including Scotland where the existing law banning fees to tenants was explicitly tightened up on November 30, 2012.
Whilst on the face of it this sounds like a good idea the experiences in Scotland prove that this really is not the case.
Since November 2012 figures quoted suggest that 10% of letting agents in Glasgow and Edinburgh have closed. Hard working individuals who had their livelihood taken away from them by a change in legislation.
This legislation will not see tenants benefit from reduced fees. Rents across Scotland have risen from an average £677 per month to £699. While this rise may be marginal, those with knowledge of the Scottish lettings industry say it is an open secret that some agents have found other ways to charge tenants fees. These include charging more for rent across the life of the tenancy and charging a higher first month fee.
For letting agents there are real costs involved in setting up a tenancy Agreement. These include creating floorplans, sourcing referencing, rent guarantee fees and inventory fees, all costs which protect both the tenant and landlord within the private rental sector.
The result of the ban could mean that agents are forced to cut out some of these services, which could be catastrophic for both the landlord and the letting agent.
Agents not getting a reference could mean that there is a rise of tenants defaulting on their rent causing real hardship to many landlords who are responsible for paying the mortgage on their properties. This could be the start of increased mortgage non-payment in the Buy to Let sector, which currently enjoy the lowest level of non-payment. This will mean a rise in the number of mortgage defaults resulting in repossession of properties.
Ed Milliband's policy could also have the long-term effect of many people for whom property is part of their pension plan potentially losing an asset which they have worked hard to own.
Agents take action and sign the petition online by following this link:
https://epetitions.direct.gov.uk/petitions/64975
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