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Tenant fees ban – surveyors reveal the effect on rents for UK landlords

2-minute read

Mollie Millman

17 June 2019

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Rents have continued to rise across all regions of Britain, according to the Royal Institution of Chartered Surveyors (RICS).

The latest report from RICS found that tenant demand ‘increased slightly’ for the fifth month in a row in May.

At the same time, the number of new properties being put on the market for rent declined.

RICS described this trend as ‘a persistent theme’ over much of the past three years and said rents have risen ‘across all regions of the UK’.

Read our article to find out how much rents are expected to increase following the ban on tenant fees.

Tenant fees ban

The rent increases are particularly notable in May as that was the month before the tenant fees ban came into play.

Foreseeing the additional costs that they would have to pay due to the ban, many landlords will have looked to increase rents to regain some of these financial losses.

The fees ban applies to new or renewed tenancy agreements signed on or after 1 June 2019, and means it’s no longer allowable to charge tenants for services such as inventories or referencing.

Simon Rubinsohn, RICS Chief Economist, said: “It remains to be seen whether the pick-up indicated in our data materialises but the deterioration in the net return for landlords certainly provides a reason why, as it is a possible outcome of recent changes in the tax treatment of buy-to-let investments.”

Shortage of rental properties

The RICS report highlighted several surveyors’ thoughts on the buy-to-let market, with John Chappell from Chappell & Co Surveyors in Skegness saying: “Further penalising legislation changes introduced by politicians (who fail to understand the market) are leading to more landlords reappraising their portfolios.”

As well as the tenant fees ban introduced at the beginning of this month, the government has also raised banning Section 21 notices.

The abolition of Section 21 would mean landlords could no longer evict a tenant at short notice.

Will landlords sell up if Section 21 is abolished?

Will Ravenhill of Readings Property Group in Leicester said: “A lot of landlords are concerned about the possible Section 21 changes that may be introduced, with quite a few saying that they will sell if it’s introduced.”

Anthony Webb of Trenchard Arlidge in Surrey added: “Many landlords are selling rather than re-letting, which will create a market shortage and the outcome is likely to be rising rents.”

And Paul Oughton of Moore Allen & Innocent said: “Existing landlord activity is up, but new landlords are becoming rarer. Tenant demand remains healthy.”

Use the comments section below to let us know how the tenant fees ban is affecting your rental investment – and how you feel about the proposed ban on Section 21 ‘no fault evictions’.

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We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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