in January this year I received a letter from my letting agent (I have 1 x BTL flat fully managed by them) containing the following information:
---------------
Following a long consultation by the Scottish Government and the lobbying campaign run by Shelter Scotland it has now been decided the charging of any fee to a tenant or recovery of any expense, over and above rent and refundable deposit, will be deemed illegal effective 30 November 2012.
Shelter Scotland seeks to clarify historic legislation which states that private landlords should not charge “premiums” to prospective tenants as a condition of granting a tenancy.
The charges we currently recover from tenants cover the costs involved in providing various services, including but not limited to: employing an independent reference company to carry out credit checks, employer and landlord’s references, including rent guarantee, where applicable.
According to consultations finding, over 95% of Scotland’s over 500 letting agents and private landlords recovered some associated costs by way of a set up or administration charge. There are no laws in England and Wales in relation to tenant charges or recovery of expenses. We are disappointed by this announcement by the Scottish Government. This legislation arrives at a time when landlords and their agents are faced with additional costs associated with the new Tenancy Deposit Scheme.
Ultimately, we believe that the associated set up costs currently directly recovered from the tenant and the additional administration costs will now be simply recovered through increased rentals.
While the service required by tenants and landlords remain the same, the charging mechanism by letting agents will now change significantly. After careful consideration of these major government policy changes, <letting agent name removed> propose recouping the credit checks, references and rent guarantee costs to the landlords, consequently with effect from 1st February 2013.
We are confident however, and would anticipate, that the additional cost can be fully offset by an increase in rental. We would propose implementing an increase of no less than the additional cost at the appropriate opportunity therefore ensuring that our landlords are not financially penalised as a result of these new government policies.
---------------
I replied at the time asking how much the rent I charge would need to increase to cover said costs, heard nothing back. however I've now received a communication from the letting agent advising the rent guarantee charge is now due, £89 every 6 months, so that's the charges to me obviously starting to kick in. although rent guarantee not legally required they strongly advise I take it up especially in the 'current economic climate.'
here are my thoughts/questions to you, please reply with any thoughts/advice:
1. I'm not intending to start the rent guarantee. if my tenant ever misses a payment (touch wood hasn't happened to me in 4 years) I'll evoke 2 month notice period and if they pay 2 x months the following month I'll revoke the notice, if they miss second month they're out. yes I'm having to absorb 2 x months costs (mortgage etc) but to me the risk is offset by the (hopefully) rare occasions this will happen and the £180 yearly charge. is my approach right, wrong, do you have rent guarantee in place?
2. it looks as though my letting agent is now starting to pass these charges on to me. would you simply increase the rent to cover the costs or absorb them yourself? it's easy for the letting agent to say 'increase the rent to cover things' but the tenant might not see it that way and I could end up with an empty property. having said that if I absorb them it's eating into my relatively low monthly profit :(
3. although their T's & C's no doubt mean they not obliged to, part of me feels the letting agent should be absorbing the costs as part of the 12% management fee they already get from me, except perhaps any works/services that are required pre tenant being accepted e.g. credit reference. do you think it's reasonable or unreasonable for me to raise this with the letting agent?
as I say any thoughts/feedback on this would be appreciated.
---------------
Following a long consultation by the Scottish Government and the lobbying campaign run by Shelter Scotland it has now been decided the charging of any fee to a tenant or recovery of any expense, over and above rent and refundable deposit, will be deemed illegal effective 30 November 2012.
Shelter Scotland seeks to clarify historic legislation which states that private landlords should not charge “premiums” to prospective tenants as a condition of granting a tenancy.
The charges we currently recover from tenants cover the costs involved in providing various services, including but not limited to: employing an independent reference company to carry out credit checks, employer and landlord’s references, including rent guarantee, where applicable.
According to consultations finding, over 95% of Scotland’s over 500 letting agents and private landlords recovered some associated costs by way of a set up or administration charge. There are no laws in England and Wales in relation to tenant charges or recovery of expenses. We are disappointed by this announcement by the Scottish Government. This legislation arrives at a time when landlords and their agents are faced with additional costs associated with the new Tenancy Deposit Scheme.
Ultimately, we believe that the associated set up costs currently directly recovered from the tenant and the additional administration costs will now be simply recovered through increased rentals.
While the service required by tenants and landlords remain the same, the charging mechanism by letting agents will now change significantly. After careful consideration of these major government policy changes, <letting agent name removed> propose recouping the credit checks, references and rent guarantee costs to the landlords, consequently with effect from 1st February 2013.
We are confident however, and would anticipate, that the additional cost can be fully offset by an increase in rental. We would propose implementing an increase of no less than the additional cost at the appropriate opportunity therefore ensuring that our landlords are not financially penalised as a result of these new government policies.
---------------
I replied at the time asking how much the rent I charge would need to increase to cover said costs, heard nothing back. however I've now received a communication from the letting agent advising the rent guarantee charge is now due, £89 every 6 months, so that's the charges to me obviously starting to kick in. although rent guarantee not legally required they strongly advise I take it up especially in the 'current economic climate.'
here are my thoughts/questions to you, please reply with any thoughts/advice:
1. I'm not intending to start the rent guarantee. if my tenant ever misses a payment (touch wood hasn't happened to me in 4 years) I'll evoke 2 month notice period and if they pay 2 x months the following month I'll revoke the notice, if they miss second month they're out. yes I'm having to absorb 2 x months costs (mortgage etc) but to me the risk is offset by the (hopefully) rare occasions this will happen and the £180 yearly charge. is my approach right, wrong, do you have rent guarantee in place?
2. it looks as though my letting agent is now starting to pass these charges on to me. would you simply increase the rent to cover the costs or absorb them yourself? it's easy for the letting agent to say 'increase the rent to cover things' but the tenant might not see it that way and I could end up with an empty property. having said that if I absorb them it's eating into my relatively low monthly profit :(
3. although their T's & C's no doubt mean they not obliged to, part of me feels the letting agent should be absorbing the costs as part of the 12% management fee they already get from me, except perhaps any works/services that are required pre tenant being accepted e.g. credit reference. do you think it's reasonable or unreasonable for me to raise this with the letting agent?
as I say any thoughts/feedback on this would be appreciated.