The new financial headache for landlords after renting law changes

Landlords are facing hundreds of pounds of extra fees from estate agents who manage their properties – with new tenant rights protections being blamed. In May this year, millions of renters across England were given a swathe of new protections under the landmark Renters’ Rights Act. Landlords can now no longer issue so-called no-fault notices to evict tenants and all renters are now on rolling contracts with no end date. Shorts Some landlords have exited the market since the Act became law but among those that have stayed, there are multiple examples of them being hit with higher charges by estate agencies, and the new law has explicitly been named as the reasoning. In one email sent to a south London landlord and seen by The i Paper, estate agency Northwood said it would be upping its fees as “the stakes for non-compliance were exceptionally high” because of the new laws. The email said: “Given the scale of these changes, the extensive administration involved, and the professional risk exposure we are assuming, we are charging our non-managed landlords a one-off compliance transfer fee of £800 plus VAT per property. “As we manage your property and collect the rent monthly, our fee is reduced to £365 plus VAT and will be applied to your next rental statement.” The landlord told The i Paper he also had the management fees on his rental income put up last year, from 12 per cent to 14.4 per cent “because of the Renters’ Rights Act”. Other landlords have also told of being hit by higher fees. James Buckley-Thorp owns six properties across Bath and Leeds and uses three estate agents. He said two of these had put their the rates on managing his properties up by between 2.5 and 5 per cent plus VAT. But he said he didn’t blame the estate agents. “The villain here is not necessarily the estate agent charging a landlord more. It is a system that keeps adding costs to renting and then blaming landlords and agents when those costs eventually appear in prices,” James said. Sean Hooker, head of redress at The Property Redress Scheme, which resolves disputes between consumers and property agents, said he had been made aware of landlords being quoted anything from £200 to over £400 for what some describe as “updating paperwork” linked to the new legislation. He said it was not unreasonable for an agent to seek to recover the cost of substantial work carried out on a landlord’s behalf, but an agent should not simply introduce a vague “Renters’ Rights Act fee” without explaining what the landlord is paying for. “Any charge should be transparent, proportionate and supported by a clear breakdown of the work involved,” Hooker added. The changes come at a time of heavy financial pressure for landlords. They are set to face a 2 percentage point increase in their income tax rates from April, while mortgages are also at high levels compared to previous years. What to do if you are unhappy with agent fees Letting fees vary depending on services offered, with full property management fees typically tending to cost 8-20 per cent of monthly rent, and rent collection fees, which don’t involve management, averaging between 3 and 12 per cent of monthly rent. There are also sometimes additional charges for things like inventories and property inspections. The end to fixed-term tenancies means for letting agents there is no longer a regular fee they could charge landlords to renew a tenancy from one fixed period to another. And landlords can’t just increase rent when a tenancy comes up for renewal and instead are restricted to doing it only once a year. Instead, they now need to issue a Section 13 notice, giving two months’ notice, if they want to increase rent prices with estate agencies able to do this on the landlord’s behalf. William Reeve, lettings expert and chief executive of lettings technology company Goodlord, said the first thing landlords should do if they’ve received a bill they’re not happy with is pick up the phone and negotiate. “Agents are reasonable people and will usually provide a range of services which can be added or removed from an agreement to help landlords find a solution that works for them.” Reeve also pointed out while increased fees may tempt some landlords to deal with property management themselves, he urged them to remember why they were using an agent in the first place. “Your time isn’t free. Without a letting agent, any issue in your portfolio is your responsibility to resolve, no matter how inconvenient. This is difficult enough with just one property, but if you plan to grow your portfolio in the future, then expecting to handle this all on your own is unrealistic.” A spokesperson for Northwood estate agency said: “The Renters’ Rights Act has introduced a range of new requirements for letting agents and landlords, resulting in large increase in additional administrative and compliance responsibilities across the sector as agents support landlords through the transition to the new regulatory framework. “It has also been well-documented that the legislation has increased the risks and possible penalties to landlords – risks which agents take on through the management arrangement. “Many agents are reviewing their service offerings and pricing structures as they support landlords through the transition to reflect the additional burdens of tasks, time and risk.”