Tenant Fee Ban – How it really affects UK Property Investors
The Tenant Fee Ban is on every agent’s lips and although for landlords they may be blissfully unaware that their costs are about to rise. Can the market rise rents in time? Will the costs be passed back to the tenants?
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Hey guys, Brett Alegre-Wood here, chairman of YPC and Gladfish. Now, what I want to do is just actually give you a bit of a summary of what’s happening with the tenant fee ban, because as a landlord and as an investor, that’s going to affect you. What it means is we as agents, can no longer charge fees, pretty much any fees; they’ve all been ruled out, to tenants.
What that means is tenants will … It’ll cost less for them to move into a property, but obviously those costs, things like check-ins and things like referencing and all these sorts of things, they are still going to be there. So yes, some of them may have been over the top and some agents may have been charging silly things, and that’s part of why the ban has come in. But I think the most important thing is, a lot of those costs are going to have to go somewhere. The reality is, the letting agent isn’t going to be able to absorb these costs, virtually any of them. And the reason I say that is because already margins have been pushed so hard with all the regulations that are required and the additional resources. There are so many things that have gone on.
In our own business, I’ve hired a full-time compliance officer, who just checks all of my staff’s work, which we’ve never had to have that before. But we now have to have a full-time person. We’ve got over 1,200 properties, approaching 1,300 properties, and that is required now. And it’s not a regulatory thing, but it’s something that lets me sleep at night, and should let you sleep at night too because obviously anything we do wrong can come back onto you as a landlord.
Obviously, there’s some insurance there that may be able to cover it, but the reality is, we just don’t want to take that risk. So there’s a massive, massive change, and what that cost is going to go onto, is onto the landline by and large. It’s another kick in the teeth from the government at a time when Brexit, at a time when all these sorts of things, tax changes and things are happening. They don’t really care. They’re not really worried about that; all they’re worried about is getting their agenda pushed through.
What can you do about it? Well, I’ll tell you what we’re doing about it. Unfortunately, a lot of the industry has really been caught with its pants down. Even though they’ve known about this for a long time, it’s almost like some of them believe that it’s not going to happen, and the other ones believe that it doesn’t really matter; they’ll deal with it when it comes up.
What we’ve been doing for the last year and a half, is we’ve been pushing those rents up, and for you guys and anyone who’s seen a change-over, we’ve got a full-time person, and their role is simply to push those rents up. What that has meant is 5.6% last year. We’re up above six percent this year for increases. That’s good news. Now, that doesn’t mean that every single year, rents are going to grow five or six percent for you, because it depends on the area, it depends on a whole range of things: what’s available at the time, how easy it is for tenants to move. Because that’s one of the things that they’re actually doing, is, on the one hand, they’re saying they want longer tenancies, which by the way ours are three years on average anyway now. And on the other hand, they are saying they want them to have mobility and fewer costs.
The reality of what’s happening now is a transference from the tenant fee being banned, and the rents are going to be pushed up, so eventually, it’s the tenant who’s going to be paying for this by and large. But in the short term, it’s going to be you as the landlord. So that just gives you a bit of an idea. How much money is it? Look, some of the agents, especially in London, have been charging what I think are over the top fees. So they will start to come down, and in fact, a lot of those businesses, and you’re going to see a lot of businesses …this will warn you, and I really mean this … I’m dead serious with it. This is already starting to happen. A lot of agents are shutting up shop.
Now, if they’ve got your money. If you’ve paid them money for a service, and they’re no longer able to do that service, you’re going to have to repay someone else. So you’ve got to really watch who you’re going with, and unfortunately, it’s the small businesses, the high street businesses, that are getting killed on this. There’s so much disruption in the industry right now because you’ve got high streets which are just being destroyed. The small boys are being destroyed, and then also, the online agents are also copping it. We’ve had Purple Bricks not meet their earnings capacity. We’ve had Countrywide, the largest agency in the country, struggling along and having to be floated out. There’s a lot of disruption happening.
Now, what can you do about that? There’s not really a lot you personally can do, apart from choosing someone who’s clearly going to survive. And so that’s going to be someone like us who has enough properties that what if we take a 10% kicking in the income? Now, somewhere between 10% and 30% of an agency’s income is going to be destroyed, okay Now, where are they going to look to get that back? They’re going to look to you, but are they going to actually be able to get it back? What we’ve heard is not necessarily all of it, but some of it is going to go to you guys. So expect your bills to go up, because you’re going to have to pay for those check-ins and check-outs. You’re going to have to pay for referencing, application fees where appropriate.
The positive thing is what we’re tending towards now, besides being a manual process which is old-school, we’re now moving to a lot of automated processes, so for lots of us, all of it is online now. That has meant efficiencies that we’ve been putting in place, and because of that, some of those costs aren’t going to need to be borne by you. There’s some good news in there. Good news? You know what? Making the best of a bad bunch, really.
Yeah, that just gives you a bit of an idea of where things are at with the tenant fee ban. Look, we’ll be announcing our new packages, which really aren’t really new packages. What we’ve done is, we’ve done a whole heap of research into the numbers of our business, and so what we’re trying to do is pretty much largely to equalize it, while we push up those rents. And I think to be fair, the guys in the business are doing a really good job of pushing those rents up and being really persuasive about it. And for those of you guys who’ve had change-overs or ASTs that have come to an end and been renewed, you will notice the prices have been creeping up, which is great news.
But anyway guys. That gives you a bit of a summary.
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