How do you handle the Tenant Fees ban?

[boletus]

I believed this (and argued it) until someone showed me a map correlating the areas of the country with the highest rent increases per annum and the highest number of s21 notice based possession hearings.

I'd be interested to see that if you have a link. Did the S8G8 show the same correlation?
But it is quite a leap to claim that proves landlords chop and change tenants to increase rents.
I've never come across a landlord who does it. Seen plenty of bad tenants claim it (omitting to mention the rent arrears and ASB).
If indeed these high end landlords are doing this, why aren't they selecting tenants who can afford rent increases in the first place?

[boletus]

I believed this (and argued it) until someone showed me a map correlating the areas of the country with the highest rent increases per annum and the highest number of s21 notice based possession hearings.

I hope you're not referring to this little gem of convincing argument JPK;

https://www.thesun.co.uk/money/44230...pletely-legal/

In 2016, research by Generation Rent found that rising house prices have fuelled no-fault evictions.

It claims that rising prices make landlords feel more confident to sell or find new tenants who will pay higher rent.

The same research that revealed that of those tenants who had to move, only 2% were because they had breached the tenancy agreement.

[kelbol]

I believed this (and argued it) until someone showed me a map correlating the areas of the country with the highest rent increases per annum and the highest number of s21 notice based possession hearings.
The correlation was uncanny (although the regions with high rent tend to be areas with a lot of people).

I think that what happens (broadly) is that some landlords increase the rent until the tenant can't afford another increase and then serve notice to the tenant.
Most tentants given notice who have been able to afford an already high rent will move out without a court hearing, and some of those that don't go to court.

In my part of the world (the West Midlands) rents don't increase at anywhere near the rate that they do in (say) London and Cambridge and aren't as high to start with, and, for me, the cost and void period would wipe out the benefit of a rent increase for a long time.
To the point where the idea had never really occurred to me as a possibility.

But a 10% annual increase on a monthly rent of £1500-£2000 plus per month changes the economics.

High population areas will have more rental activity. You should look at the number of S21 per 1000 people or average number of properties advertised over a certain period, per 1000 of population. That way population size won't matter.

[kelbol]

^^^ That's the crux of the thing. And marginally risky tenants won't get tenancies at all. I certainly won't bother going through hoops. A 20% increase in rents across the board would balance the risks for me -- obviously that won't happen in a single step, but it is the net long-term effect.

How can a ban on tenant fees lead to risky tenants losing out? If anything, they can apply to more properties as they have no fee to pay. If they slip through the net, it's the LL who hasn't done due diligence, with or without tenant fees.

How can a LL tell if the tenant will be short-term or not if the tenant doesn't want to reveal that? Especially in the new climate that will favour longer-term tenancies, tenants would learn to present themselves as long-term.

I think the bottom line is tenants will end up with a higher rent to make up for the fee ban. The higher rent may well make LL more money in the end, especially if they try to cut down on short-term tenants (and manage to do so).

[jpkeates]

I'd be interested to see that if you have a link. Did the S8G8 show the same correlation?
But it is quite a leap to claim that proves landlords chop and change tenants to increase rents.
I've never come across a landlord who does it. Seen plenty of bad tenants claim it (omitting to mention the rent arrears and ASB).
If indeed these high end landlords are doing this, why aren't they selecting tenants who can afford rent increases in the first place?

I'll try and find it.

It was sent to me by Giles Peaker (Nearly Legal website) during a discussion on Twitter.
I made pretty much the same point you did (which reflected my thinking at the time) and he, very politely pointed out that he spent a lot of time representing people that this was happening to (I think London based) and shared the stats.

It wasn't just that there was a bit of a correlation, it was really notable.

What I outlined as the kind of process is how I think it happens in a very general way.
And why aren't the landlords finding tenants who can afford increases in the first place? Until recently increases were so steep and regular that people started off in the can afford it group, swiftly moved into the can barely afford it if we don't eat group and then into the can't afford it group.

[JK0]

Nothing like confusing correlation with causation, eh?

[boletus]

How can a ban on tenant fees lead to risky tenants losing out?

He said marginally risky tenants.
For example, a landlord might have taken a punt on someone who is recently self employed when they were paying for the checks themselves. In fees and time, it costs maybe £100 to check a tenant, why bother when there are plenty of other vanilla candidates?

How can a LL tell if the tenant will be short-term or not if the tenant doesn't want to reveal that?

By interviewing them and then checking out their story. If they claim the 5th amendment, move on to the next enquirer.

[jpkeates]

Think this is everything I was sent.


Background:
Population of England (about) 55m, London (about) 8.5m (15% of total).
Dwellings in England (about) 23.9m, dwellings in London (about) 3.5m (14.5% total).

https://www.jrf.org.uk/report/povert...d-forced-moves

TL/DR version - "Rents have risen faster in London than other parts of Britain, especially in the last year. The annual increase in rents in London now stands at 4.1 per cent"

"Nearly two-thirds (62.4%) of all repossessions using Section 21 take place in London."

Most relevant part starts on page 11

"Figure 7 shows that the repossession rate, across all types of private landlord action, in the three regions of London, the East and the South East, has risen by more than a half (60%), from 4.49 per 1,000 to 7.2 per 1,000 since 2003, while in the rest of England, the repossession rate has risen by 7% since 2003, from 1.9 per 1,000 to just under 2.1 per 1,000."

"Four out of every five (81.4%) of all repossessions using Section 21 take place in the three regions of London, the East and the South East."

"Figure 10 shows that the repossession rate using Section 21 in London has risen by 87%, while in England excluding London, the rate has risen by 66%.."


The data on rent increases is here - https://www.ons.gov.uk/economy/infla...-country-level

The data on repossessions (is here) - https://assets.publishing.service.go...Oct-Dec_18.pdf

[boletus]

Thanks for digging that out JPK.
I think your discussion with Giles Peaker must have been slightly different to the one here.

What your link shows is landlords exiting a housing benefit market that has become no longer viable due to circumstances outside of their control (tax, benefit changes, changes in legislation). The large number of section 21's is because benefits tenants are told to stay until evicted.

It's not the same as (implied) greedy landlords chopping and changing tenants on a (implied) whim.
-Because they don't.

[JK0]

Rather like climate change causing CO2 increase, instead of CO2 increase causing climate change, I wonder if it was the repossessions that caused the rent increases rather than rent increases causing repossessions?

Perhaps having a larger turnover of tenants who refuse to even pay existing rent means landlords tend to update their rent more often, rather than updating their rent necessitating turnover of tenants? I know which I think sounds more sensible.

[AndrewDod]

How can a ban on tenant fees lead to risky tenants losing out?

That's fairly obvious:

I will no longer be able to accept tenants who need to pay a holding deposit to secure a property (for example while awaiting a visa or a final job confirmation)

I will no longer be able to accept tenants who need to be able to prove their low risk status to secure a property and to have me get that information rapidly (I will simply assume the worst)

I will no longer be able to accept tenants who need to pay a premium to delay a start date.

I will no longer be able to accept tenants who have pets or are a potential risk (because the deposit will not be commensurate with the risk)

I will no longer be able to accept tenants do not yet have UK bank accounts with sufficient funds (because they live abroad and are not allowed to pay a holding deposit)

I will no longer be able to accept tenants do not yet have a UK visa (because they are not allowed to pay a holding deposit while I wait)

I will no longer be able to accept tenants who require a guarantor because it is not absolutely clear to me that they can be asked to pay the costs involved to draw up proper agreements

More broadly, I will not use an agent to procure tenants and will do so myself. Agents tend to select riskier tenants because the risk is not their risk.

I would also prefer to select tenants where it is clear they have no desire to lay down roots in the area, to the detriment of those who do (because some fool like Jeremy Corbyn with a political philosophy derived from the most odious regimes in history might place me in a situation where I am faced with a lifetime of financial detriment and distress).

[boletus]

From JPK's kindly provided links. Note the dates;

JRF report;

the rented sector has grown in the past 12 years by nearly a half, and the number of tenants being evicted from their homes has grown by a third: 10,000 more tenants lost their homes in 2015 than in 2003

Latest possession statistics;

Landlord possession claims, orders, warrants and repossessions by county court bailiffs have decreased by 5%, 1%, 3% and 5% respectively (compared to the same quarter last year). The general fall across landlord possession actions continues the long-term decreasing trend seen since April-June 2014.

Rents haven't been falling over the last 5 years.

But without the benefit of hindsight, those very cleverly presented statistics are hard to argue against at the time, even when you know the premise is blatantly false.

[kelbol]

That's fairly obvious:

I will no longer be able to accept tenants who need to pay a holding deposit to secure a property (for example while awaiting a visa or a final job confirmation)

I will no longer be able to accept tenants who need to be able to prove their low risk status to secure a property and to have me get that information rapidly (I will simply assume the worst)

I will no longer be able to accept tenants who need to pay a premium to delay a start date.

I will no longer be able to accept tenants who have pets or are a potential risk (because the deposit will not be commensurate with the risk)

I will no longer be able to accept tenants do not yet have UK bank accounts with sufficient funds (because they live abroad and are not allowed to pay a holding deposit)

I will no longer be able to accept tenants do not yet have a UK visa (because they are not allowed to pay a holding deposit while I wait)

I will no longer be able to accept tenants who require a guarantor because it is not absolutely clear to me that they can be asked to pay the costs involved to draw up proper agreements

More broadly, I will not use an agent to procure tenants and will do so myself. Agents tend to select riskier tenants because the risk is not their risk.

I would also prefer to select tenants where it is clear they have no desire to lay down roots in the area, to the detriment of those who do (because some fool like Jeremy Corbyn with a political philosophy derived from the most odious regimes in history might place me in a situation where I am faced with a lifetime of financial detriment and distress).

I wouldn't call most of them "risky". To me risky is not paying rent or trashing the house.
The one who can't pay a premium to delay the start date - just get them to sign now and start paying the rent asap even if they can't physically move in.
Pets - just increase the rent accordingly.
No UK visa - not a financial risk for me as above, but agreed, you don't want to keep to house for them for nothing and lose out financially.
But with or without fees, why would you consider most of the above if you can get a straightforward tenant?
I wouldn't bother with a tenant requiring a guarantor - this already says a lot about the tenant's financial situation. I don't accept pets either, no matter what the rent or deposit.

I will no longer be able to accept tenants who need to be able to prove their low risk status to secure a property and to have me get that information rapidly (I will simply assume the worst)

How else are you going to know if a tenant is low risk or not?

[boletus]

I wouldn't call most of them "risky".

He said "marginally" risky. I would do too.

But with or without fees, why would you consider most of the above if you can get a straightforward tenant?

Diversification. I've got many perfect tenants all from one country, but I don't want anymore of them. What if the Zlasmark booms? What if the industry they work in collapses? What if....

I wouldn't bother with a tenant requiring a guarantor - this already says a lot about the tenant's financial situation.

The latest tenant I took on with a guarantor was a celebrity DJ earning well over £100K, perfect credit history. The only way I took him on was with his old man on a pension acting as a guarantor.

I don't accept pets either, no matter what the rent or deposit.

I've got tenants approaching 20 years with pets.

[kelbol]

It's a bit like playing the lottery when taking tenants with pets. You don't know if they will take care of the pets and not dirty your property. I'd rather not find out the hard way.