So, what can we put in Agreements now?

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    So, what can we put in Agreements now?


    More on the side-effects of the "Tenant Fees Ban".

    In my naivety I thought that not having charged tenants any fees for anything whatsover for the last decade would mean that I was unaffected by the latest wave of guff from the Gnomes of Westminster. If only I knew :-).

    Having studied it all, it turns out that they have done everything from further undermining deposit protection to making pet tenancies far more difficult to doing random, but unclear, things to recovery of damages.

    I have read solicitor David Smith's excellent briefing, which is unfortunately filled with maybes, mights and don't yet knows - which hints at 5-10 years of legal actions before we know what this law actually means.

    Along the way my business model (geared to long term tenancies / no voids) has been upended, and is now getting a complete overhaul: three year no rent increase clauses to help young couples are going, well-below cpi in tenancy increases are going, and at the least rents will migrate back to where they would have been after inflation since the start.

    I think my pet management (half have dogs) via advanced vetting, permission letters, and trustworthy tenants, is still standing.

    I have seen nothing in the way of overhaul of eg the RLA standard AST contract still contains provsion for fees which will be unlawful / illegal (yes, I will be asking them), and not for the now required pre-announcement of other things.

    How do I incorporate eg provision for damages under contract law so that my Ts have at least some warning? And can I charge no deposits and incorporate settlement of differences on damages (eg a dog eats my doors) via arbitration? And what do I do about warning about the cost of keyed-alike multiple lock replacement on key-loss, now that the official guidance says that all you do is replace one key?

    Who is working on this?

    Am I going to need to subscribe to Tessa?

    Yes, I am aware that existing tenancies have 12 months, but since I will be putting in rent increases of up to 15% just to get into line with inflation, I owe as much warning as possible to Ts. And that is before the market review and reevaluating business and regulatory risks.

    Cheers

    ML

    Refer Mad Regulators to Arkell vs Pressdram.

    #2
    Originally posted by midlandslandlord View Post
    How do I incorporate eg provision for damages under contract law so that my Ts have at least some warning? And can I charge no deposits and incorporate settlement of differences on damages (eg a dog eats my doors) via arbitration? And what do I do about warning about the cost of keyed-alike multiple lock replacement on key-loss, now that the official guidance says that all you do is replace one key?
    As you don't charge fees, there's no reason for you to change anything really.
    The provisions for damage already exist, in that a claim against the tenant is already allowed unless the contract already covers it.

    Generally speaking damage claims (and lost keys and so on) are made on the basis of compensation for a loss not envisaged when the contract was made - which is way fair wear and tear (which is envisaged) is excluded.
    You don't have to do anything to incorporate that notion into a contract, it's already there - by including specific provisions in an agreement, you are possibly weakening your position.

    By not having deposits and protection, your only place of arbitration is a court (unless you can agree something with a professional arbitration service).

    The guidance about one key relates to contractual terms where a fee is agreed for a replacement key. It's better to keep the issue out of the agreement and if the tenant loses their key simply charge them the actual cost of replacemant, which isn't a fee.

    The new legislation doesn't mean that tenants can no longer be charged for things that aren't in the agreement, like damage, just that you can't build in fees - so your tenancy agreement can't require that a tenant pays someone to clean the property, but you can still charge them for compensation if the property is returned in a condition worse than how it was at the beginning less fair wear and tear.

    The compensation would be limited to the cost of getting it into the condition it would have been in with fair wear and tear.

    It does cause greater issues with pets, because if a pet is allowed, the amount of fair wear and tear is adjusted, but you are allowed to charge more rent to allow a pet (arguably as long as you also reduce it when there is no longer a pet).

    Yes, I am aware that existing tenancies have 12 months, but since I will be putting in rent increases of up to 15% just to get into line with inflation, I owe as much warning as possible to Ts. And that is before the market review and reevaluating business and regulatory risks.
    Obviously what you charge and how you run your business is entirely your affair, but if you weren't charging any fees before, I'm not sure why you need to change.
    Your model of long term tenancies is probably the least affected by the ban, unless fees are a key element of your income, which they don't seem to be.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks - all useful.

      Just checked with RLA, and they will be issuing a new agreement at the end of the month.

      One of the reasons for going against deposits was a) because of the paperwork etc involved, b) My Ts are very good in general and often come via word of mouth with reputations I can check, and c) because going towards long-term tenancies means that a lot of things are scoped out by depreciation rules. eg If a tenancy is expected to last say 5+ years as a norm, then things like disputes about marks on carpets are moot anyway due to the rules used in Deposit Scheme Dispute Resolution.

      >Obviously what you charge and how you run your business is entirely your affair, but if you weren't charging any fees before, I'm not sure why you need to change. Your model of long term tenancies is probably the least affected by the ban, unless fees are a key element of your income, which they don't seem to be.

      Probably correct, though my view is that the most heavy affects will not happen due to fees, but rather to general rents being forced upwards by the impact of fees being passed through, or the additional costs of other imposed risks ; I do not believe the claims about rents not increasing in Scotland (I went to the trouble of fact-checking the research). Those claims are based on the presumption that any impact would be immediate, whilst in fact half of tenancies in Scotland would not be up for renewal for about 3-5 years, so it is no wonder that a large majority of landlords had not considered it in the first year.

      One of the things for me is aligning rents with inflation and potentially market on a yearly basis, due to risk of year-by-year rent control coming in, and the wrench that fill cause for some Ts. I can see that happening as a Day 1 Rabbit from a Hat for certain types of Govt.

      The things about Dispute Resolution and so on are me trying to think through broader implications. As I say, I have read the law, the regs, and some of the debates, and it is a festival of Kool Aid Swallowing.

      ML
      Refer Mad Regulators to Arkell vs Pressdram.

      Comment


        #4
        Most of my tenants are similarly long term, and I have a sane approach to end of contract claims and just don't have much of a problem with them.

        Rent increases are interesting because every time there is something that increases some cost to a landlord, the RLA puts out a statement that the change means that rents will rise, and forums like this one opine in parallel. And rents don't rise (any more than they would have anyway).

        Most rent levels are set by the market, which includes mostly small landlords, many of whom aren't affected by interest restrictions on mortgages (because they either don't have a mortgage or they're not higher rate taxpayers) or fees (because they don't use agents and don't charge fees - possibly beyond the cost of a credit check, which is small). Those landlords act as a brake on rent increases by landlords affected.

        That effect is amplified where a landlord uses an agent because the agent is incentivised to match expected pricing because they don't earn until the property is let (and even moreso after June 1). They know the best price for online search filters and will advise in line with their knowledge (and some self-interest).

        There's an effective cap on available property rent in an area which is based around what people think they can afford (and an absolute cap based on what they can afford).

        I do agree that the risk of percentage based rent increases is mitigated by charging a market level rent now, and that might come as a shock to tenants who've previously benefitted from a rate commensurate with the longevity of their tenancy.

        Some of the points above don\t apply in areas where the market functions irrationally, like some parts of London.

        Always good to see a fellow midlands landlord!
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment

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