A NEW ACT which comes into force on 1 June could end up hurting the people it is supposed to help, warns a leading property management consultant. The Tenant Fees Act stops landlords from charging more than five weeks’ rent as a deposit, banning letting fees and disallowing charges for damages without providing evidence of costs.
But while on the surface it seems like an extra layer of protection for tenants, it could end up costing them more money.
Daniel Gibson, an experienced property management consultant who runs Daniel Craig Residential based in Newcastle, said the changes will mean more costs passed on to landlords, who are likely to increase rents to mitigate their potential losses.
And that means that tenants could find themselves facing additional charges.
“This new Act means that the letting charges which would normally be split between the tenant and the landlord, now have to be completely paid by the landlord,” said Daniel.
“And that means landlords will be looking at ways to recoup the money which will inevitably come back to the tenant.”
Mr Gibson – whose company has more than 1000 properties on its books across the North East – has already put a plan in place to offset the implications of the Act by finding ways of reducing costs.
But he reveals that other agencies are not being so proactive. Research carried out by Daniel Craig Residential on agencies in the region has highlighted that the average landlord fee for letting a property has doubled, going from 50 per cent of a month’s rent to 100 per cent.
“Those agencies which have smaller increases in the let fee seem to be compensating by increasing their monthly management fee as well,” said Daniel.
The effects of the Act are already being felt, as one 33-year-old woman has revealed.
The woman, who didn’t want to be named, rents a one bedroomed flat in a converted semi-detached Victorian terrace, and pays £615 a month rent.
“I had a call recently from my landlord with news that the agency that manages the property I rent intends to scrap my tenancy renewal fee of £50 a year and instead raise my rent by £25 a month,” she said.
“This repackaging of fees into a so-called rent increase, represents a charge five times more than I would pay annually for my renewal fee. My landlord won’t receive this extra money.
“I know I’m only talking about £250 more a year but I’m saving really hard to save for a deposit for a property and increases like this make my dream of home ownership less and less realistic.
“When I heard about the legislation I was thrilled but now I’ve discovered I’ll be worse off than before”
Mr Gibson believes this kind of experience will become increasingly more common unless landlords deal with a company who have found ways to offset the possible charges.
With this in mind he has moved Daniel Craig Residential to a new, lower priced office and using the company expertise in portfolio development and management to look at other areas of potential savings.
“We believe we will be able to offer a very attractive option for landlords who may be facing a huge increase in their management fees through their existing agency or might be considering having to self-manage,” said Daniel.
“The savings we are putting in place across Daniel Craig Residential means that landlords we work with will not feel the effect of the Act.”
For further information visit www.danielcraigresidential.co.uk or call 0191 265 6555