What can the Tenant Fees Act 2019 teach us about the Renters (Reform) Bill?
The Tenant Fees Act 2019 was the last big piece of legislative change in the English lettings sector, so here's what agents can learn from it ahead of the Renters (Reform) Bill.
The Tenant Fees Act 2019 is often mentioned in the same breath as the Renters (Reform) Bill, as a comparable piece of legislation that transformed the private rented sector. Coming into force in the same year that the Renters (Reform) Bill was first announced, the fee ban changed the relationship between agents and tenants.
Early-adopters saw success
The ban made it illegal for agents to charge their tenants fees when they rent a property and set limits on how much tenants could be charged for holding and security deposits.
The vast majority of agencies got well ahead of the process changes - and the revenue changes - the ban would bring. That adaptable mentality will stand agents in good stead as we head into the new renters reform world.
Although agents were predicted to lose up to 20% of their income, many found new ways to earn and become more cost effective. Those that didn't, fell behind.
Even the agents that moved early on the Tenant Fee Ban wished they hadn't waited for a change in legislation to increase their profit margins through the new and improved processes and services that they implemented.
So, if you haven't started yet, there really is no better time than now.
Process changes mean more streamlining
Agent processes will change once again under this new bill. This is simply another chance for your agency to start taking advantage of better ways of operating and streamlining your business at the earliest possible point.
Tenancy agreements will have to be amended - and the government should provide those templates. Landlord terms of business will need to adapt to include new clauses too, with the end of fixed-term tenancies.
This is a constant area of risk and cost to all agents, which is why Goodlord can provide automatically updated templates to all its customers as standard.
Fee structures to be adapted
The ban also gave agents the chance to look at their fee model, conversions, and missed revenue streams - and adjust costs accordingly.
This new legislation is the same. Start thinking about your fee structure, and consider transitioning to rolling, monthly fees - if you haven't already - with a single upfront payment to cover admin costs.
Speak to your let-only landlords - have they realised that managing their own property is more difficult than they envisaged? Is now the time for them to lean on you more for rent collection or even full management?
Do your homework and see if they've missed any compliance steps, or if they're out of sync with the market rates for rents, to demonstrate immediately the impact that you could have.
Consider how you can incorporate a rent review service too and make the most of those extra touch points with your landlords. You can use this as a chance to take over managing other properties in their portfolio - or help them find their next investment - while offering services to support that process.
Reassuring landlords around their biggest concerns
It's not just your business that you have to prepare. Under the current proposals, there are a number of positives for landlords, including (but not limited to):
- stronger eviction powers under section 8
- the ability to still increase rent annually if justified
- a better quality standard of home for all stakeholders
If you and your teams are not communicating this now to your landlords, who will?
Act now, and benefit early
Although the fee ban can give an idea on timelines, the truth is that we don't know when the Renters (Reform) Bill will come into play.
The Tenant Fees Act had a 13-month gap between it being delivered to parliament and its implementation on 1 June 2019. It followed a similar, two-stage path to that proposed in the Renters (Reform) Bill for its new tenancy system. First, new tenancies were affected. Then, a year later, all existing tenancies were captured by the new rules.
However, that doesn't mean that we should take this same time period as gospel. Why? More MPs are landlords than letting agents - and they will therefore be more affected by this bill, which may have consequences on how quickly it can progress.
"There's going to be a lot more MPs with a stake in it," said Ryan Heaven, Solicitor at Dutton Gregory, in our latest webinar.
"More people will petition their MPs to protect their interests. I think there's going to be a lot more discussion about this, and discussion ultimately means delay. If I had to put money on it, I would say it's going to take longer than for the Tenant Fees Act."
More clarity is needed around many of the building blocks of the bill, but there's enough detail there for agents to start to plan - the earlier, the better.