Disruption Drives Innovation

RAH Blog
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19 February 2019
by Redmayne Arnold and Harris

The Tenant Fees Act 2019

The Tenant Fees Bill confirmed by The Parliamentary Under-Secretary of State, Lord Bourne of Aberystwyth, on the 15th of January 2019, was given Royal Assent on 12th February 2019 and therefore confirmed into law as The Tenant Fees Act 2019.

This enacts the ban on tenant fees announced in the 2016 Autumn Statement, and will, amongst other things, prohibit agencies and private landlords charging upfront fees to tenants in relation to letting a residential property in England and Wales. In short it sets out that:

  • It will become illegal for all agencies and private landlords to charge non-optional fees to tenants or to guarantors on or after 1st June 2019, including renewals.
  • Deposits will be limited to the equivalent of 5 weeks rent for tenancies of less than £4,167 pcm and 6 weeks for tenancies over this amount.
  • Agencies and private landlords can charge some default fees – such as for replacement keys.
  • If an agencies or private landlord charge any of the banned fees after this date, they will be liable to refund the fee, with interest, and could be fined up to £30,000 and subject to a banning order. They will also be unable to serve a Section 21 Notice to Quit unless any unlawful fees are repaid.

The tenancy application process has developed into a complex procedure, heavily laden with legislation. Credit checks, extensive referencing, Right to Rent checks, safety checks, deposit registration and the provision of legally binding contracts form just part of the process. The consequences for not completing these efficiently and diligently can result in the inability to re-gain possession of a property, significant fines and criminal proceedings for both the agency and the landlord.

Unregulated tenant fees and a highly competitive industry have resulted in an escalation of charges, in some cases to unjustifiable levels. It’s fair to say that some in the market are not clear as to what their tenant fees cover, and the reality is that these are not commensurate with the work involved. This is often due to agencies offering discounted management fees to their landlords – often to great fanfare – which are in turn subsidised by inflated fees to tenants.

The Government sites the Tenant Fees Act as the driving force for fairness and transparency in the private rental sector. In an industry so historically lacking in regulation – there is currently no minimum experience or level of qualification to work in lettings – this should be a welcomed disruption to those who share our desire to value excellence. Industry specific training, externally monitored qualifications and minimum levels of experience should all be as standard for those in a direct position to look after what is likely to be somebody’s most valuable asset – their property.

The challenge for us is to manage the increase workload this Act no doubt brings, minimise the risks to our landlords and continue to provide the high level of service we are proud to deliver. We have always been of the belief that disruption drives innovation, and we are well prepared at RAH. We have implemented several new systems resulting in dramatic improvements to our productivity of process.

  • Cloud-based tenancy application software - allowing us to manage a greater volume with increased efficiency. It provides a digital audit trail, automated compliance processes and increased speed in which we can complete the process. We have already seen significant benefit as it takes RAH 11 days to go from application to executed AST, compared to an industry average of 26 days, thus reducing the risk of abortive costs and void periods to you.
  • DocuSign - electronic completion and signature process for all documentation. This means we are now not reliant on paper-based documents.
  • Rightmove Passport - RAH are one of very few agents in the country trialling a new ‘pre-qualified’ application procedure introduced by Rightmove. Tenants, who enquire to us via Rightmove, can be pre-vetted speeding up their potential application.

Not all our improvements are digital or process driven. Our biggest asset remains our people. We are proud to announce that 100% of our lettings team are now members of ARLA PropertyMark. This is not a legislative requirement – no qualifications or minimum level of experience is required to work in our industry. This was not good enough for us. We set ourselves higher standards, so at RAH we are fully funding the Continuous Professional Development of our people via the industry leading ARLA qualifications program.

There is no silver bullet that will solve this challenge, yet we are determined to embrace new technologies and processes to manage and maintain our position as one of the leading agencies in the area. I am proud that RAH will be at the forefront.

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