Tenant Fee Ban Part 2 of 3 – Impact on the PRS

By | 2019-05-02T15:32:26+00:00 May 2nd, 2019|News|0 Comments

With less than 30 days to go until the Tenant Fee Ban takes effect, we take a look at the potential impact that this landmark legislation could have on the Private Rental Sector in England.

For those who missed our previous email on this subject, please click here to discover what the Tenant Fees Act 2019 represents.

Otherwise, read on as we make predictions on what could happen once the Tenant Fee Ban Act comes into force on the 1st June…

The Current Lettings Market

There is no denying that the lettings climate in the UK has become increasingly complex in recent years. With over 160 individual pieces of legislation to adhere to, landlords have had a difficult time ensuring that they remain fully compliant with the regulations.  Tenant expectations around the quality and suitability of rental accommodation have also increased. What this means is that landlords can no longer simply ‘let and forget’.

Aside from the legislative requirements, further barriers to entry such as increased Stamp Duty on purchases and Section 24 tax restrictions can dramatically change the financial outlook for many landlords. Now, more than ever, landlords and property investors need to look at property letting from a business perspective to ensure that they are doing things right.

Tenant Fee Ban Impact 

The aim of the tenant fee ban (according to the Government) is to create a ‘fairer, more competitive and more affordable lettings market where tenants have greater clarity and control over what they will pay’. This in theory sounds like brilliant news for tenants, but there are question marks surrounding the longer term effects that this could have on the sector as a whole.

Below are our predictions on the impact that the ban will have:

1. Increased Tenant Demand

With some agents charging upto £1,000.00 in tenancy fees to applicants there can be no escaping the fact that many tenants would have simply preferred to stay put rather then fork out on excessive moving costs. Abolishing fees – and capping deposits – opens up the market for anyone who wishes to move into a new rental property and creates a level playing field across the sector.

The upside for landlords is that an increase in demand might allow for an increase in asking prices and quicker lets. The downside of course is that overall tenancy duration may suffer as some of the barriers which may have previously stopped tenants from moving are effectively wiped out.

To that end, landlords and letting agents will need to ensure they are providing the highest possible level of service to all tenants in order to reduce voids. We stand by the notion that a happy tenant is very often a long term tenant.

2. Rent Increases

In a recent survey by the Property Redress Scheme, a whopping 87% of lettings agents predicted that rents will rise as a result of the tenant fee ban.

ARLA Propertymark predicts that letting fees currently account for around £700million per year in revenue for landlords and letting agents. Whilst some agents have quite clearly been taking advantage of the opportunity to charge excessive fees to tenants – something we feel has contributed to the ban in the first place – there is no denying that processing a tenancy application compliantly can involve a lot of time and effort. Those wishing to maintain a viable business therefore must consider the impact that the ban might have.

We are already beginning to see rent hikes from private landlords who had previously charged administration fees to their tenants. Even at just £25.00pcm – an amount which many would see as a modest rental increase – this totals £300.00 per annum in increased rents for tenants. With the average tenancy length in the UK at around 3.9 years, the question therefore is who really gains from the ban?







3. Increase in Letting Agent Fees to landlords

The hard truth is that many letting agencies are reliant upon tenancy fees in order to maintain a viable business model. That being said, it’s quite clear that those agents who have taken this to the extreme will find themselves suffering the most when the tenant fee ban comes into play.

We expect that some agents will simply exit the market altogether as the reality of the ban bites. Those that remain will be looking very carefully at their internal procedures to ensure that efficiency is paramount, whilst remaining compliant and not cutting corners. It isn’t unusual for agents to have charged very low letting fees to landlords and very high letting fees to tenants. This in itself could prove to have been an unwise decision.

Looking at things pragmatically, it’s becoming quite apparent that landlords may have to shoulder some of the burden too. Despite the ever increasing workload being placed on agents to remain compliant, fees across the sector have typically not changed for many years. We expect to see somewhat of a shift in the market with many agents having no choice but to increase fees or close up.

Any agent worth their salt will quite easily be able to justify their fees. We would strongly recommend questioning agents who are able to dramatically undercut on prices. Are you sure they have you covered in the event that something goes wrong? Where are they making up the shortfall?

4. Increase in ‘fall through’ applications

Holding deposits will be capped at the equivalent of just one weeks rent when the ban comes in. What this means is that for many applicants the potential loss from not proceeding with a tenancy will be minimal. We expect to see an increase in fall through rates off the back of this. Some applicants won’t think much of paying a holding deposit for a property only to ditch their application if something better comes up. After all, they are now also saving on fees!

What this means is that agents and landlords are going to have to be particularly efficient when processing  tenancy applications. The goal ultimately being to have the tenancy agreement signed and confirmed as soon as possible. Difficulty for applicants when completing an application or delays from the landlord / agent could quite easily result in a fall through.

Technology will also play a big part. Ensuring that applications are processed quickly and compliantly. Did you know that we use software which allows tenants to complete their full application (including bank statements) from a smartphone? They can upload ID’s, pay rents / deposits and even sign their tenancy agreement all through an app. The whole process is time and date stamped to create a full audit trail too.

tenant fee ban summary






It’s clear that times are changing for the Private Rental Sector. Despite many looking at the tenant fee ban with dismay and despair.  The reality is that it’s implementation should open up the market for the consumer. In our opinion, anything that benefits the consumer is a good thing, but then who is really going to feel the benefit in the long run?

Fees to landlords are likely to go up. Rents will closely follow and the consumer is likely to be paying more over time. So will the ban truly prove to be a success?

Our final installment of this series – due to be released in a couple of weeks – will be highlighting ways in which we can support you during the difficult times ahead. Keep your eyes peeled!

As always, if you do wish to discuss things in more detail then give us a call today on 0115 981 9651. We are happy to share our knowledge or answer any questions you may have.

We hope to hear from you soon.


Tenant Fee Ban 

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