A lack of understanding of the Renters Rights Act could mean letting agents falling foul of the new regulations, it’s claimed.
In a survey of UK letting agents by The Lettings Partnership, four in ten (41%) were unaware that they will be prohibited from accepting any rent before the tenancy agreement has been signed by all parties.
Meanwhile, more than a third (36%) didn’t realise that any tenancy clause requiring more than one month’s rent in advance will become unenforceable.
Ahead of the new regulations, a similar amount (38%) admitted that they request or accept more than one month’s rent in advance, either regularly (20%) or occasionally (18%).
The RRA forbids letting agents or landlords from requesting payments of more than one month’s rent in advance, although tenants can voluntarily choose to pay more if they wish.
Protecting against risks
Rent in advance has most often been used by agents to protect against the increased risks posed by tenants with poor credit history (37%), international tenants (24%) or those without a guarantor (18%).
In the survey, 44% of agents said that they are only fairly prepared or worse for the upcoming changes, with 33% saying they are fairly prepared, 9% not very prepared and 2% not at all prepared.
A third of agents are worried about the increased risk of rental arrears and a result of the removal of rent in advance, followed by greater difficulty progressing tenants without a guarantor (25%). 19% expect an increase in administrative and compliance workload, whilst 15% anticipate a higher risk of disputes with landlords.
A practical tool
Chris Mason, COO of The Letting Partnership, said: “Rent in advance has long been used by agents as a practical tool to help progress tenants who may not meet standard referencing criteria, whether that’s due to income structure, credit history or a lack of a guarantor.
“What these findings show is that while the industry is aware that change is coming, a significant proportion of agents are still not fully across the details of how these rules will operate in practice.
“The challenge is not just removing rent in advance as an option but understanding what replaces it and how that impacts both tenant progression and client accounting processes.
“Where agents have relied on rent in advance to manage risk, there is now a need to reassess affordability checks, guarantor requirements and internal processes, all while ensuring they remain compliant with the new rules.
