In the Government’s Housing White Paper earlier this year, there were some changes proposed that would have an impact of the profits of landlords. The Queen, in her 2017 speech, has confirmed that certain areas such as a ban on lettings fees and a deposit cap will go ahead.
Letting fees ban
Charging administrative fees to tenants for moving into a property or renewing a tenancy will soon be banned. According to government figures, the average amount paid in letting fees is £223.
While many letting agents charge tenants with the cost of administration, some use it as an opportunity to make a profit. Because of this, letting fees can vary from landlord to landlord. The ban will be put in place to make private sector renting fairer and more affordable for the public.
Deposit cap
In recent years, the value of the upfront deposit has grown. In some cases, it can be two times the amount of one month’s rent. This is done by landlords to protect themselves against any potential damage or breaches of the tenancy agreement.
The current maximum tenancy deposit is two month’s rent, but the government has outlined a new plan that would cap tenancy deposits to one month.
The National Landlord Association (NLA) estimate that around 40 per cent of deposits exceed one month’s rent. Richard Lambert, CEO at NLA, explains: “Whilst capping them may reduce the move-in costs for some, it will increase the temptation for others to view the deposit as the last month’s rent, leaving landlords out of pocket at the end of the tenancy if, for example, the property has been damaged.
What the changes mean
Banning letting agent fees and creating a cap on the value of the deposit will improve transparency for renters. By having no fees and a deposit no larger than the value of one month’s rent, it becomes easier for renters to compare the market without thinking about the hidden fees that could be added. The barrier on up front, hidden costs could allow more people to rent.
With the deposit on your buy to let property most likely becoming smaller as a result of the changes, it becomes more important to protect yourself from any breaches of contract.
Despite the uncertainty and changes to landlords’ abilities, Birmingham is a popular choice for property investors. Whether you’re an experienced landlord or are new to the industry, a property inventory is needed to prevent disputes with tenants.
To find out how we can help make it easier to manage your property in Birmingham, call us today on 07891 551 905 or email info@skribes.co.uk.