After all the upheaval of the last 12months, private landlords could be forgiven for feeling they’re already on the ropes. The Private Rented Sector (PRS) once offered successive governments a ‘get out of jail free’ card – taking up the slack for all the council housing either sold off or unbuilt. It was a win-win for minimalist government – hundreds of thousands given housing, and landlords making their own provision for retirement. Wind forward thirty years, however, and the very success of the PRS has become a bit of an embarrassment to parties desperate to appeal to the political middle ground. Once politicians realised that the sector was heading for five million dwellings, and those dwellings had voters in, the spotlight was well and truly lit.
In recent years, landlords have been bombarded with a bewildering array of legislation – some well-intentioned, but much of it with onerous liabilities, and significant penalties for the unwary. Double stamp duty and the removal of tax relief on mortgage interest are causing landlords to question whether to carry on at all. The National Landlords Association estimated this summer that roughly 20% of all landlords were actively looking to sell.
Against this backdrop, 2019 will see the introduction of the Tenant Fees Bill coming into force, possibly as early as April. Whilst this may seem primarily directed at agents, the effects could well be felt both by landlords and tenants. Such was the vote-losing potential of even querying this latest piece of legislation, not a single MP rose to offer any criticism of the bill when it was debated in the House! Given that Parliament had already shifted liability for Right to Rent checks from the Border Force to High Street letting agents, agents are feeling rightfully miffed that they are now expected to pay for tenants to prove they have the wherewithal to take a lease. Of course some less respected agents were taking advantage, charging excessive fees to tenants, and protagonists were quick to question how agents could ethically take fees from both sides. Solicitors would call it Chinese walls, but letting agents now have to call it charity! The fact is that the work still has to be done and Quay has a full-time member of staff employed purely to handle the administration of tenancies. We have always used an independent inventory clerk, paid for jointly by landlord and tenant to minimise disputes at the end of tenancies. Now tenants can no longer be charged fees, we can anticipate many more end-of-term disputes heading towards the Deposit Protection Service.
The Government claims publically that the loss of income will ‘encourage competition’ amongst agents, whilst quietly anticipating that they will be forced to raise charges to landlords in order to maintain their business. Of course, landlords faced with higher charges will be looking to recoup their costs – and if indeed the NLA’s anticipated 380,000 landlords sell up in 2019 then fortune may favour the brave. A shrinking pool of letting properties could well see rents heading north again, after their recent, Brexit-induced lull.
No-one, not even the Government, can be too sure how 2019 will play out for the PRS. They make great claims about wanting to professionalise the sector, and those of us who are qualified and signed-up to the various protection schemes would heartily agree. Whether the latest round of regulation achieves this remains to be seen. It will certainly encourage mergers between firms seeking economies of scale, but how that will play out for customer service remains to be seen.
For landlords in 2019, the temptation may be to go it alone to save money, but a good agent will always earn their fee and protect their clients from the plethora of pitfalls that trap the unwary. One thing is for sure – the legislation will keep on coming. Whether it’s client money protection, mandatory electrical checks, further changes to Section 21’s or landlord licensing, there will be plenty to keep us all on our toes in 2019!