HMO Lettings: The New Lettings Fee Ban and What You Need to Know and What you can do About it.
The New Lettings Fee Ban
Following the Autumn Statement, the Chancellor Philip Hammond said he hoped to bring in a new lettings fee ban, charging landlords and letting agent’s fees to reference tenants when renting a property in England and Wales. Letting agents’ fees are charges for the admin costs associated with a tenant moving in to a property.
It is estimated this ban will benefit 4.3 million households across the country as the cost is rising to rent properties, on average costing around £2000 just to get into a house for single lets and around £1000 for HMOs and shared housing. This is already common practice In Scotland where letting agents’ fees to tenants have already been banned, while in England and Wales letting and managing agents have been legally obliged to clearly publicise their fees since last year. There’s been no confirmed date for the ban yet, but Hammond did say it would be introduced “as soon as possible”. The Department for Communities and Local Government is responsible for the housing sector and will consult ahead of bringing forward legislation. Before letting a property, letting agents run a number of checks on potential renters. The subsequent admin costs include:
Drawing up contractsTaking an inventory of the property before tenants move inRunning credit checksGetting references from previous landlords, agents and employers
The cost of this now is fall onto the landlord, especially in HMOs where the tenant turnover is typically much higher than that of single lets as tenants tend to move on average between every 6-12 months where as in single lets its between 2-4 years. This means HMO landlords will be paying a lot of regular lettings fees to reference tenants and begs the question does renting a property as an HMO make sense with the new changes?
Time will tell if this rule comes to fruition but we would not be surprised if it does and it might well impact the way lettings are conducted and has the potential to influence the decision to buy investment properties and especially HMOs with the higher tenant turnover.