The head of an automated payment system for the rental sector says lettings agents can help offset losses caused by the fees ban through the greater use of PropTech.
The Tenant Fees Act finally came into force over the weekend, and Neil Cobbold - chief operating officer of PayProp - says this should finally give greater clarity to the lettings industry.
But he says: "While the legislation will undoubtedly help protect renters from a minority of agents that charge exorbitant fees, it will take some time to determine the true consequences of the tenant fees ban and whether it leads to rent rises across the board.
"In order to replace lost revenue from tenant fees, agents will need to generate new income streams, make their processes more efficient and potentially increase landlord management costs where necessary."
Cobbold says that research by Kent Reliance shows over a third of landlords are looking to cut costs, with 30 per cent saying they want to reduce their spend on letting agent fees.
“There is no doubt that the introduction of the Tenant Fees Act will require agents to work harder to retain existing business and secure new clients. The best agencies will already have prepared and implemented various strategies to help combat the revenue lost” he continues.
"These will include adopting the best PropTech services and products and streamlining their businesses. This will allow agents to dedicate more time to their clients and provide outstanding customer service - a cornerstone of the lettings industry which could help an agency to differentiate from their competitors.
"The future for letting agencies remains bright as the private rental sector continues to grow and the need for professional experts rises in an increasingly complex and regulated lettings market.”
Here’s a reminder of what the Tenant Fees Act now in force means:
- Agents and landlords must not require tenants to make any payment or loan as a condition of the tenancy and this includes fees for securing references or inventories or any other front-loading of costs;
- The only payments permitted to be charged to tenants are rent; a refundable tenant deposit of no more than five weeks’ rent (where the annual rent is less than £50,000) or six weeks’ rent (where the annual rent is £50,000 or more); and a refundable ‘holding’ deposit of no more than one week’s rent and a payment by the tenant in the event of their default, such as a late payment or breach of the tenancy agreement. Anything else is regarded in law as a “prohibited payment”;
- This now applies to new tenancies only; from June 1 2020 this will apply to all tenancies;
- Holding deposits must be refunded to tenants within seven days of the tenancy agreement being completed, or within 15 days of taking the deposit if the agreement is not completed for reasons within the agent’s or landlord’s control;
-There can be a small fee if a tenant requests a variation of the tenancy but this is limited to £50 unless additional costs can be shown to have been incurred;
- Local authorities, charged with enforcing the legislation, can fine an agent or landlord up to £5,000 for levying a prohibited payment.
- Local authorities can prosecute or impose a fine of up to £30,000 if an ‘offence’ under the Act has been committed, being where a landlord or letting agent has been fined or convicted for a breach within the last five years and commits a further different breach.