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It’s safe to say that 2018 has presented yet more challenges for the private rented sector and 2019 looks set to continue in the same vein. With further change on the horizon, including a ban on agent fees to tenants, capped deposits and mandatory Client Money Protection, it is important that agents prepare for what’s ahead to ensure they remain competitive and compliant.
Surcharges for certain electronic payments were prohibited from 13 January. This means that if a letting agent takes rent or a deposit via credit card, debit card, mobile phone payments or electronic payments such as PayPal, they must not add a surcharge to that payment.
In January, the Ministry of Housing, Communities & Local Government (MHCLG), published a new version of the How to Rent checklist, which was last updated on 9 July (England only).
Landlords and letting agents must ensure tenants have the new version of the How to Rent guide. This applies whether it is a new tenancy or a renewal and also includes any tenancies that became statutory periodic tenancies on or after 26 June 2018. Failure to provide the guide before the tenancy commences can invalidate a Section 21 notice.
In April, new banning orders were introduced, meaning that any letting agent or landlord convicted of offences under the government’s new law, may be banned from renting accommodation for a period of time. This could range from 12 months to life, with those landlords and letting agents who receive a banning order being recorded on a rogue database system. If a landlord ignores a banning order, they will face criminal sanctions, from six months in prison to an unlimited fine.
Also in April, the government introduced Minimum Energy Efficiency Standards (MEES). This means any property rented with a new tenancy or renewal after this date must have an Energy Performance Certificate (EPC) rating of E or above. From 1 April 2020, this will apply to all tenancies, including existing tenancies.
On 25 May, a significant change in data protection rules came into effect known as ‘GDPR’ (General Data Protection Regulations). This means all businesses are now required to audit and safeguard any personal information they collect and hold, based on the consent of their customers, which in a letting agent’s case would be landlords and tenants. Agents must have a policy in place that regularly monitors what information they have, what they do with it and how long it is retained for.
During 2018, the government proposed to ban letting agents from charging high fees to tenants in respect of granting, renewing or extending a tenancy. A draft Bill has now been published with the proposed date of implementation coming some time in 2019.
Paul Shamplina, Hamilton Fraser Brand Ambassador, says of the ban:
“Agents’ greatest challenge next year will of course be the tenant fee ban, which for some could have a significant impact on their business, potentially involving a 10-30 per cent reduction in income. It is possible we will see more mergers and acquisitions, and business closures.”
The Bill also proposes that security deposits will be capped at five weeks’ rent (for tenancies with an annual rent of below £50,000) and holding deposits capped at one weeks’ rent. It’s possible the ban could be brought into force in the early part of 2019 to coincide with Client Money Protection (CMP).
During the Autumn budget 2017, it was announced that there would be a consultation on how to incentivise landlords to offer longer tenancies, with possible plans to introduce mandatory three-year tenancies. This consultation, ‘Overcoming the barriers to longer tenancies in the private rented sector’ is now closed and we await the response.
During 2019, all letting agents carrying out work in relation to housing in England will be required to join a Client Money Protection Scheme to protect consumers against misappropriation of monies held by them belonging to their customers and clients. Prospective schemes will be announced in early 2019 with the law being enacted most likely in April 2019. It is already a legal requirement for agents operating in Scotland and Wales to hold this important consumer protection insurance.
It is already a requirement to carry out five yearly electrical checks on HMOs, but a recent MHCLG working group recommended that all specified private rented properties should undertake five yearly electrical safety checks. The government has since announced a full consultation on how this will come into effect.
Letting agents will fall under the same money laundering regulations as estate agents from 2020. At the moment the requirement will only apply to high rents over the equivalent of €10,000 per month, but this could be lowered in the future.
The government has set up a working group to look at the regulation of property agents. They are tasked to look at mandatory qualifications, a universal code of practice and models for a single independent regulator. The government did announce that they were considering a single ombudsman scheme, but instead look set to create a new homes ombudsman and look at ways consumers can access all the different redress schemes through a single portal.
Over the last few years, our industry has undergone an enormous amount of change as a result of supply and demand, market forces, government intervention and of course, the evolution of the proptech industry. Recent news-worthy events regarding high-profile agent collapses (both online and traditional), plummeting share prices, lack of supply, stagnating and reducing house prices show that confidence in the UK housing market is at a low point.
Now, letting agents across the UK are facing a complete overhaul in the way they operate, leaving many having to give serious consideration to their business models in preparation for the upcoming ban on up-front fees.
However, with more people in the country renting than ever before, this industry is far from dead in the water, but rather requires agents to take a step back, reevaluate and evolve. There are still opportunities for those willing to move with the times and look at new ways of working.
Paul Shamplina suggests that agents need to prepare now to replace any lost income by identifying upselling opportunities, converting managed only lets to full service and investing in new prop-tech software. He stresses the need for agents to communicate more effectively with their customers and help them see the value they provide.
“If the national average rent is £660pcm, or £7,920 per annum, a landlord using an agent charging a 10 per cent management fee would be charged £792 per year, which equates to just £2.17 per day to have their property fully managed - what a great way to present the value a letting agent offers to a landlord,” he points out.
Remember, every landlord and tenant is still a potential consumer that needs help with their housing requirements, from application through to move-in and beyond. So, the opportunity to provide the right products and services to help ease this burden is enormous.
Cross-sell, up-sell, but don’t sell up!
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Property Redress Scheme is approved by Government under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015