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Stamp Duty, Tax Changes, Letting Fee's Ban, A Truly Memorable 2016.

In his Autumn statement the chancellor decided to make a surprise announcement that he will be banning fee’s that prospective tenants currently have to pay to letting agencies prior to moving into a property. This follows on from the stamp duty changes, and also the changes in tax, coming in from next spring, so what does all this mean for sales and lettings in the year ahead.

It comes as some light relief that following the ban on letting agents fee’s, it was subsequently announced by the Department for Communities and Local Government that they are ‘working on forming a consultation’, and primary legislation is needed. Because the government is going to be a little busy with a little thing called Brexit, this primary legislation will more than likely not be looked at before Autumn 2017. The ban will therefore more than likely not be introduced until 2018.

So the chancellor bringing in a ban on letting fee’s ‘as soon as possible’ , could easily mean over 1.5 years to bring in. This is good news as it will give letting agents an opportunity to work out how to cover the costs associated with a tenant before move in day.

That light relief may be short lived though, as it has now also been reported than the ban could be added to an existing bill, already going through parliament. So maybe we will need to do some planning sooner than first thought.

So who should foot the bill, if a tenant applies for a property and subsequently fails the referencing because they have bad credit, maybe due to not paying a bill, or maybe having a county court judgement against them, or maybe not looking after a landlords property ?

I think that in this example, then a tenant should 100% pay for the service and time the agent has given them. I’m not sure why the agent or the landlord should pay for the tenants financial circumstances in this instance, or inability to look after a property properly.

I am in total agreement for fee’s to tenants to be regulated, some national chain agencies have been taking advantage, with one chain charging tenants extra money for moving in within 3 days (something which I would see as an advantage for both the agency and the landlord) . The same agency charges extra for moving in at the weekend, which is ridiculous. Some agencies have been reported as charging over £1000.00 in fee’s before the tenants moves in. So yes, there needs to be regulation, and I would suggest a cap on the fee’s charged to tenants before they move in, during the duration of their tenancy and also their leaving the tenancy. I would suggest a percentage of the monthly rent. This enables the agency to cover their costs for the work carried out, and even make a little profit, it’s a business and should be allowed to make profit from a service.

If as I expect, the government just introduces a ban on fee’s charged by letting agents before a tenant signs a tenancy agreement and moves into the property; then the agencies will simply raise fee’s on tenants after they move in or find other ways around the ban. Here are some examples.

Agencies only allowing 6 month tenancy agreements that do not automatically go into a rolling contract. They then charge a large amount for renewing the tenancy agreement.

Agencies insisting on references and credit scores from specific third parties – third parties either owned by the agency, or ones who will pay the agency for the referral.

Agencies charging a large amount for a reference when a tenant moves onto another property.

Any changes in the tenancy agreement ( i.e. one person replacing someone else ) , will cost the tenant a large amount.

Looking at this from another point of view, if the government make it cheaper for a tenant to move, then they will move more often. If a tenant moves more often, then the agency will have to advertise, market and find new tenants more often. This will lead to landlords having to pay initial letting fee’s to agencies more often, I suspect the landlords will then need to recoup this through increased rents.

It’s a good thing that the government wish to make it cheaper and easier for people who are unable to, or do not wish to buy a house, to move into. People who are moving around to different rental properties are typically people who cannot afford high fee’s such as students and lower paid workers. The real reason for the current situation though, is the lack of housing, it is a simple supply and demand situation.

The landlords currently have a commodity that is in demand, and any costs coming from letting agencies and from government tax changes will be passed back onto the tenants, whether in fee’s or in rent increases. The only way to make it more affordable for people renting is by balancing out the number of people looking with the number of houses available. This can only be done by building more homes, not through taxation and fee changes, designed to win popularity, rather than solve the problem.

It is great that this is going to be consulted on before any outright ban is brought in. I predict that 2017 is going to be a bit bumpy, with Brexit, stamp duty and tax issues all coming into play for landlords. Hopefully each of these issues will be watered down as the housing market continues to be very strong in Manchester, supported by factors such as still relatively cheap city living, and the massively rising number of students each year and improved transport networks and links.

If you are looking for any advice in regard to your property in Manchester, then please don’t hesitate to give Suttons City Living a call on 0161 832 9922

Rob Kenyon

Sales and Lettings Manager

Suttons City Living