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

Bill O'Dell

22:35 PM, 6th December 2018
About A week ago

Reply to the comment left by Harry Albert Lettings & Estates at 06/12/2018 - 19:22
Andrew
A comprehensive reply and I think you for the time it took you. We all get fed up with landlord bashing and you of agent bashing and it is easy to fall into a stereotype or to assume one.
If all agents took your view and all landlords took our (majority Property118 contributors) views then the PRS would be in a better state than it is.
I look forward to other contributions from you.

Harry Albert Lettings & Estates

9:28 AM, 7th December 2018
About 7 days ago

I entirely agree, we actually started our company when there was a lot of reports of rogue agents. We thought "surely it can't be that bad", only it really is 😂

The good news is, over time it will improve, I can't help but think that right now, the government is trying to make it so difficult that the rogues simply give up but I don't think they will, regulation or not, rogues will exist and will disregard the rules if there is money to be made.

Still, I'm glad I had the opportunity to clear things up and thanks for taking the time to read it 🙂

Gillian Schifreen

10:12 AM, 8th December 2018
About 6 days ago

Having rented out property in a couple of area of the UK, one North, one South we've always used 4 weeks deposit as the norm. 4 weeks, 6 weeks, just arbitrary figures pulled out of the air.

Harry Albert Lettings & Estates

11:17 AM, 8th December 2018
About 6 days ago

Reply to the comment left by Gillian Schifreen at 08/12/2018 - 10:12We use 6 weeks as it's affordable for the tenants and it usually just about covers the cost of replacing/repairing damaged carpets, doors and walls but it always belongs to the tenants until they go over fair wear and tear.
By reducing the deposit we can take, it means we will recover that reduction via rent but the tenant won't receive this back like they would if they just paid the deposit.

As agents, we're tasking with protecting our client's asset and if we take too small a deposit, the landlord is likely to incur charges if the deposit doesn't cover any damages caused by the tenant, whether that's paying excesses or higher insurance premiums or just outright covering costs of repair or replacement.

JB

11:49 AM, 8th December 2018
About 6 days ago

Reply to the comment left by Gillian Schifreen at 08/12/2018 - 10:12
The point of taking 6 weeks deposit is that you have 2 weeks in hand if the tenant leaves without paying the last month's rent.

Gromit

14:35 PM, 8th December 2018
About 5 days ago

In USA, Landlords at the start of a tenancy take the Deposit, first months rent and crucially the last months rent.
I don't know if the new legislation prohibits this.

Jireh Homes

16:24 PM, 8th December 2018
About 5 days ago

Reply to the comment left by JB at 08/12/2018 - 11:49
Where properties are let fully furnished, the 4 + 2 week for deposit does not provide the same protection for the landlord who let unfurnished properties, although where significant fabric damage any amount of deposit is likely to cover. Where rents are low (outside the high cost areas of the country), the 2 week allowance does not cover the costs for cleaning and furnishing damages & spoilage, hence have stipulated a deposit of 8 weeks. In addition, where pets are allowed, a greater deposit has been requested as additional cleaning is highly probable.

Colin Dartnell

18:35 PM, 8th December 2018
About 5 days ago

Reply to the comment left by Bill O'Dell at 06/12/2018 - 14:04
I think you may have misread what the agent said, to quote "should they opt to remain in the property for a further 6 month period". That doesn't in any way imply that the agent wants them out to re-let the property, he is just making an observation.

Bill O'Dell

18:36 PM, 8th December 2018
About 5 days ago

Reply to the comment left by Colin Dartnell at 08/12/2018 - 18:35
Already covered in his reply to me.
Thanks Colin

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