All Quiet on the Westminster Front
As August comes to an end the Private Rented Sector will be waiting for news on various pieces of legislation - the introduction of Mandatory Client Money Protection(CMP) in England, a tightening of Electrical Safety Regulations, pinning down and formalising the "abandonment " process. All have an impact of the work carried out by the 20,000 or so letting agents that need to change existing, or implement new processes. At the moment it's a bit like driving in the fog which hinders pretty much everything. We are not preaching to the converted.
Most of our clients have CMP, and in the main they also push landlords to follow Due Diligence and ensure that appliances are safe, as well as the electrics. The latter is clearly a very serious topic, given the fire in the Grenfell Tower. The industry is used to dealing with an onslaught of change - legislation written for the landlord and carried out by the letting agent - everyone prefers to know when the changes come into force so they can plan, organise, reshuffle and more importantly, comply.
At the moment there is a LOT of uncertainty in the industry. The Kubler-Ross Curve of Change is an excellent example of how we respond to change. The change I refer to is the "Tenant Fee Ban", not a choice made by business owners, a decision made by the Government. We have come across all the different reactions shown in the "Curve".
- Is the ban actually going ahead? I don't think it is (Denial)
- What's going to happen to my business? How will we cope? (Fear & anxiety)
- Let's make changes and put in place an Action Plan (Moving On)
- Shall we sell up ? (Fear & Uncertainty)
Preparedness is the Key
Navigating unchartered waters means unfamiliarity and if a letting agent does not want to flounder, We have no experience of this type of change; comparisons have been made with the Fee Ban in Scotland, yet this does not provide a realistic similarity. The corporates are set to lose on average £20 million per year in revenue whilst the smaller independent is looking at £50,000.00. So what do we know so far?
The fees currently charged to a tenant, will disappear, this includes referencing, administration/ document fee, inventory, check-in/check-out charges, renewal fees, and so the list goes on (We have an in-depth list).
What might stay? Apparently any charge that is a a result of a "tenant action", for example, damages (currently and always dealt with through the deposit), requests to amend the contract (permission for a pet, additional occupants, surrender/early termination).
What's new? For the first time we will see the "Capped security deposit and holding fee" both, bizarrely, refundable. Again, we need to see the detail in the Draft Bill expected in October 2017, but because of this many referencing companies are offering an "insurance" product which will replace the deposit.
What are the options? Offering additional or new services to landlords- we have seen an increased demand for Block Management training; advising tenants to source their reference through referencing companies we already use; reviewing current fees charged to landlords (currently very low) and putting in place an increase; making the decision to take commission from suppliers, insurers for example. Streamlined systems to reduce cost and increase efficiency.
The fire at the Grenfell Tower mean that civil servants are dealing with far greater issues, however, there will without a doubt be an announcement once Parliament reconvenes.
Susie Crolla CEO