Agent bites back at Westminster for 5 week deposit cap

by Property 118

9:59 AM, 6th December 2018
About A week ago

Agent bites back at Westminster for 5 week deposit cap

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Agent bites back at Westminster for 5 week deposit cap

Harry Albert Lettings and Estates agent, Andrew Hill, has sent an angry open email to the Secretary of State for Housing, Communities and Local Government, James BrokeThehousingmarketShire, regarding the recent decision to cap the maximum deposit for rentals a 5 weeks rent for contracts less than £50,000 per annum or 6 weeks above.

Andrew Hill’s email:

“Dear James Brokenshire, MP;

I’m writing to you today to notify you of an upcoming rent increase for all tenants in rented accommodation within the UK.

Please find attached notice of the rent increase in the local area of the House of Commons. It is unfortunate as landlords are expected to shoulder more risk with limited rewards but in the real world, this simply isn’t possible.

The new announcement yesterday regarding the five week deposit cap will mean tenants living near the House of Commons will be set to pay an extra £399.30 per month in rent to recover the 6th week deposit during the initial fixed term of 6 months… Should tenants opt to remain for a further fixed term, they will have paid an extra £798.60 in extra rent with the difference between the rent and deposit being good tenants get their deposit back, good tenants don’t get their rent back. The rent increase notification is based on one of the cheapest, one bed rental properties I could find closest to the House of Commons.

In our local area, a £700pcm property would incur a rent increase of £26pcm, a much easier pill to swallow than that forced down the throats of London tenants, but for some of our lowest income tenants, this short increase is enough to push them below our affordability criteria; this means these lowest income tenants, some of whom are the most vulnerable within our society, will be at increased risk of rent arrears and, because most landlords are not charities and own property as an investment, similar to your own pension pot and any rental properties you or your colleagues own, this will lead to increased evictions.

As rents sky rocket, tenants will either be forced into properties that are too small for their needs that they can afford or pushed into substandard accommodation that’s cheap for a reason. Alternatively, those unable to find housing, including tenants on benefits (because housing benefit has been frozen until 2020) and those with pets, will be forced into social housing which is already at breaking point; in Leicester alone, there are nearly 17’000 people waiting for social housing, of which there is only 8’000 social housing properties available in Leicester.

This rent increase only takes into consideration the deposit cap. It doesn’t take into consideration the tenant fee ban, our rising costs of operating costs, our landlord’s rising costs including the reduction in tax relief on mortgage interest payments and increased costs resulting from more stringent health and safety regulations and minimum energy efficiency standards.

For us to recover our tenant fees of £125 per adult will mean two tenants moving into our property will be paying an extra £41.67pcm on top of the extra £26pcm (total: £47.67pcm before taking into consideration other costs) meaning tenants will be spending more in rent should they opt to remain in the property for a further 6 month period, in the case of our tenants, they’ll be paying double in extra rent if they remain in our property for one year (renewing for a second fixed term) than had they just paid our tenant fee.

Our previous correspondence with your department was met with an email response informing us that these measures will save tenants money.

We, the RLA, the NLA, landlords across the nation, letting agents, property managers, property solicitors and local authorities are well aware that the opposite will be the case. How do you justify paying the same amount or more in extra rent over a prolonged period will save tenants money when rents are unlikely to fall once costs have been recovered?

How exactly have you arrived at the logic that, tenants paying more in rent to cover tenant fees, should they stay in the property for another fixed term, will save them money once the tenant fee ban comes in? We, and the rest of our industry, and the Private Rented Sector as a whole would really like to know; a clear detailed explanation is what we require, we’d also like to see the maths that demonstrates tenants will save money.

The proposal of minimum 3 year tenancies will be disastrous when we take the above into account.”



Comments

russell branch

10:33 AM, 6th December 2018
About A week ago

As an native Brit and landlord it is clear to me the UK is not governed for the benefit of my sort. Rather government policies favour an international elite and those of foreign birth. As a result I have moved abroad to reduce my CGT liabilities on property sales as I have no desire to contribute tax revenues to a hostile power which governs against people of my ilk.

S Somerset

12:28 PM, 6th December 2018
About A week ago

*rant warning*

If we had a legal system sufficient to evict bad / non-paying tenants efficiently, landlords would not necessarily need such a large deposit.

I'm from Australia, and we can evict tenants after they are 15 days late in their payment! They are then evicted very swiftly - minimising the loss and stress to the landlord. That said, there are very few poor paying tenants.

Here in the UK I had to evict some non-paying tenants (they had plenty of money, but chose not to pay) and it took me 6 months plus through the courts. Having 6 weeks' deposit, plus landlord insurance lessoned the blow. But the real issue lies with the pro-tenant legislation, plus illegal advice from Shelter and local authorities, plus tenants poor records not following them around.

So much talk about a bad landlord register (fine with me), but what about a bad tenant register too?

There's such an entitlement culture here in the UK!

*rant over*

John Walker

13:04 PM, 6th December 2018
About A week ago

Reply to S Somerset.
Hi, not so much a rant as an argument in favour of a more realistic attitude to non-payment of rent by unscrupulous tenants, egged on by the likes of Shelter and LHAs, who advise tenants to sit tight until the bailiffs arrive.

Whiteskifreak Surrey

13:48 PM, 6th December 2018
About A week ago

I am concerned with the following excerpt: "..most landlords are not charities and own property as an investment, similar to your own pension pot and any rental properties you or your colleagues own..."
From what we maintain we are a BUSINESS. That is why we consider S24 unfair, as it penalises only renting business, and not other businesses.
Does anyone has a similar concern?

Bill O'Dell

14:04 PM, 6th December 2018
About A week ago

I found the comment "..Should tenants opt to remain for a further fixed term.." concerning.
This agent seems to be resigning tenants every 6 months for a new fixed term lease and creating unnecessary costs for the landlord and (currently) the tenant. I find this churning of tenants unreasonable and unfair to all concerned. Doesn't he know about periodic tenancies?

Michael Barnes

17:45 PM, 6th December 2018
About A week ago

Reply to the comment left by Bill O'Dell at 06/12/2018 - 14:04
I'm with you. The only reason I can see for agents to go for new fixed terms (and long initial fixed terms) is to get more money for themselves, not for the landlord's interests (does this contravene the law of agency?) and certainly not for the benefit of the tenants.

Harry Albert Lettings & Estates

19:22 PM, 6th December 2018
About A week ago

To reply to Bill O'Dell and Michael Barns;
We prefer fixed terms as it means tenants are more secure in their homes. Our process is to have all new tenants move into the property on a 6month AST, this will then be extended for a further 6 months or a year depending on the landlord's or their own preference. We don't really like periodic tenancies as it means the landlord's asset isn't as secure as it would be if we had a contract detailing an amount of time the tenant should be living in the property; I'd rather know if a tenant will be in the property for 6 months than knowing they MIGHT give notice at any point to move out the following month at any point.
We disagree with the idea of a mandatory fixed term of anything more than 6 months, but you'll be pleased to know we never charge tenants or landlords renewal fees, we do charge a £99 tenant find fee whenever our landlord clients need new tenants (provided we're managing their property, it's quite a lot more for a standard Let Only service). Then again,we can afford to charge this low fee because we actively go out and do what landlords pay us for and that's to find tenants - we don't just list the property on Rightmove and Zoopla and wait for tenants to find their property, like most agents appear to these days.
We charge this low tenant find fee because our profit comes solely from management charges and commissions from our suppliers if we're lucky, depending on the number of viewings we have for a property, we're lucky if there's any profit in tenant turnover for us.
We disagree with fleecing landlords and tenants for every penny we can which is why we are so vocal when we're lumped in with other agents who do rip landlords and tenants off for every penny they can.
We are a for profit business but we recognise our landlords invest in property, these investments won't be so appealing if their agent is taking every penny they can from them, would they?
Likewise, tenants have it hard enough without being booted out every 6 months, forced to find somewhere else to live, come up with the deposit, month's rent in advance, tenant fees, etc. So, we don't charge them any renewal fees either. We don't make any profit on tenant turnovers, tenancy renewals, etc. Unless a tenant falsifies their application or changes their mind after the application process is complete (in which case, they forfeit all fees and we retain anything leftover at the point we realise the tenant has lied or at the point the tenant informs us they don't want to go ahead with the tenancy - this is always clearly explained and we have zero hidden costs payable by any of our clients, whether they're landlords or tenants).
In fact, you can view all of our fees on our website, where we also publish our Fair Fee Guarantee.
We want our tenants to feel secure in their home; our tenants are as much our client as our landlords are. They benefit from a very in-depth, hands-on service provided free of charge (well, inclusive in their rent, I suppose, but we don't get paid anything for it other than the management fee the landlord pays us - 7% of the rent due each month, incidentally) as a tenant living in our properties; this includes signposting where required to charities, foodbanks and other organisations who may be able to help them where required, including the local authority, etc. We also help tenants to complete forms, find better energy deals and insurance products (even if we aren't earning a commission) and if they tell us they're looking for new employment opportunities, we will actively keep our eyes open for suitable roles and let them know. We're not sure if we will still be providing this level of service to tenants after the fee ban, mind you, but I daresay we will be because happy tenants = long term tenants.
We like to keep our tenants happy because our aim is to achieve long-term tenants who are happy to remain in our properties for the long term without being held to ransom by ridiculously long tenancies that place too much risk on our landlord client should the tenants ever go rogue, stop paying their rent, damage the property, become anti-social, etc.
Perhaps your opinions are very telling of the industry as a whole, immediately, your first thoughts are "Ah, they must be rip off merchants like the rest of 'em", but as I say, we renew tenancies so tenants have the security that they won't be forced out of the door in two months time and likewise, so landlords know they won't have an empty property a month tomorrow. The only time we leave tenants on a periodic tenancy is if we feel they were unreliable during the fixed term or if their circumstances are expected to change dramatically, whereby they may be unable to pay the rent, in which case it would be unfair to force them onto a fixed term if we know, as well as they do, that there may be a chance they can't afford the rent and fall into rent arrears.
We do actively encourage our landlords to chase arrears taking legal action where necessary so it would be out of line with our policies if we forced a tenant onto a fixed term knowing they may not be able to afford the rent every month, we'd rather them hand us notice and find more affordable accommodation than fall into arrears taking away from our landlord client's ROI.
We used to use Utility Warehouse to sign tenants up if they didn't have a preference over their supplier but, given your opinions, you'll be surprised to hear we were very vocal about jacking that in when we received a letter informing us that they would be charging any customers of ours who are tenants a £100 deposit if they want to UW to supply their gas or electricity, regardless of financial standing, credit worthiness/history or whatever, the only criteria they need to have to pay the deposit is if they are a tenant. This is unfair treatment of tenants and incompatible with our ethics as an organisation.
At the same time, we're the first to criticise the likes of Shelter for their unfair treatment of landlords and agents in their communications.
It's unfortunate that there are people who feel the sector is overrun by agents whose lifeblood is the fees earned from landlords and tenants through high tenant turnover but, Michael, I can assure you, we are not contravening the law of agency and in fact, both sets of client's interests (landlords and tenants) are put before our own. All of our policies are developed with our landlord and tenant client's interests in mind.
All the best,
Andrew Hill
MD of Harry Albert Lettings & Estates

Harry Albert Lettings & Estates

19:31 PM, 6th December 2018
About A week ago

Further to my previous comment, Michael, if our landlords are unhappy with our service, they can leave with 1 month's notice (or immediately in the case of severe failings).

The 1 month notice period gives us time to get the files together ready to handover to the new agent or to the landlord. We don't charge exit fees or transfer fees. Nor do we penalise the tenant if the landlord were to sack us.

Funnily enough, we've not had a single landlord leave us yet. 😀

Phil Ashford

21:57 PM, 6th December 2018
About A week ago

Reply to the comment left by Bill O'Dell at 06/12/2018 - 14:04
You and Michael Barnes make an assumption that there are fees involved with creating a renewal Tenancy?

There’s plainly obvious reasons why a Fixed Term Contract is more preferable than a rolling. Lots of agents have no fees for a renewal.

Taking a poll of my landlords, the majority prefer not to be on a Periodic Tenancy - and let’s be clear, no one should ever be on a Statutory Periodic Tenancy, only Contractual Periodic Tenancies.

Assuming that someone must be ‘on the make’ perhaps hinders you from concluding appropriately. Intriguingly, I tested my openness and looked at the Agent’s fee structures as they correctly list their fees on their website as they should. They do not charge their landlord’s for a renewal fee - only when finding a new tenant.

Eradicating your fear of what this Agent is doing by fixing Tenancies each time, might draw you to the more reasonable conclusion that they are in fact trying to lock in and protect the interests of their landlords by giving some certainty on future cash flows.

No doubt, like us, they’ll be following up with their tenants at month 4 to check on their intentions and seek further clarity of future cash flows.

Rather than assuming that something is awry, consider that someone may have a different strategy that you as yet do not understand or at best, agree with.

wanda wang

22:30 PM, 6th December 2018
About A week ago

Reply to the comment left by S Somerset at 06/12/2018 - 12:28
well pointed the problem lay here in the UK, but the government hasn't get the clue. Still ask for more protection for the tenants and more regulation for landlords

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