The chief executive of a specialist buy to let lender says increasing the rent to combat additional costs put on landlords following the fees ban should be a “last resort”.
Andrew Turner, chief executive of Commercial Trust, says a first priority for a landlord using a lettings agent should be to understand what - if anything - is going to happen on June 1 when the Tenant Fees Act comes into force.
“If landlords haven’t heard anything from their agency yet, it is worth making contact as soon as possible, to understand if there are likely to be additional costs and if so, what these will amount to” he advises.
Turner says that, evidently, knowing from an early stage how the Tenant Fees Ban will affect a landlord’s finances, puts that individual in a stronger place to adjust their strategy accordingly.
“If there are no changes to fees from the agent, the status quo is maintained. However, if an agent is proposing to increase their fees, it is vital to calculate the impact.If the net end result is that the cost cannot be absorbed, increasing the rent may be the only recourse” he admits.
Turner says it’s vital for landlords - or their agents if they instruct them to do so - to understand that a minimum of one month’s notice of a rent increase is required where rent is paid weekly or monthly.
Six months’ notice on yearly tenancies must be given to the tenant, if the rent is to increase.
He also says that landlords must remember that letting agent fees and management fees are tax deductible - “In other words, whilst landlords may have to find extra money to cover additional charges, they can reclaim the tax on this cost.”
Turner says that in his view, the general consensus is that many letting agents may find it hard to replace lost income.
“We have seen changes within the lettings industry, with mergers and acquisitions taking place, to create larger agencies. Other agencies may look to streamline costs with by automating more of their processes” he notes.
But he warns there is also concern that, unable to charge tenants, some agents will instead increase the costs they charge to landlords for managed services.
The knock-on effect of this, many fear, is that the tenant - whom the Act is meant to benefit through lower costs - could find that their rent goes up, as landlords feel the financial strain of yet more additional outgoings.