Tenant Change Over Costs
As of June 2019, landlords and agents in the UK are no longer allowed to charge tenants any fees for setting up or managing a tenancy. These fees had previously been used to subsidize landlord costs in the UK.
Activities that were previously funded by tenant fees include:
- Applicant processing (registration and assessment, queries, negotiations with landlords, referencing, compliance with Right to Rent, guarantor handling, and creation and execution of tenancy agreements)
- Tenancy start (managing inventory and condition reports, registering deposits, providing information to tenants, addressing tenant queries, and providing property induction)
- Tenancy management (pursuing late rent, processing payments, rent reviews, renewals, and handling documents)
- Tenancy end (identifying damage or breaches, negotiating agreements, and advising on market norms and expectations)
- Given that these activities are essential for safely and legally managing rental properties, landlords will need to cover the costs themselves.
The company offers three options for handling these costs:
- Single Applicant – a fixed cost of £415 per tenancy changeover for one applicant and no guarantor, with an average monthly cost after tax of £10.73.
- Multiple Applicant – a fixed cost of £595 per tenancy changeover, regardless of the number of tenants, with an average monthly cost after tax of £15.39.
- Monthly fee – an additional monthly fee of £38 for the first 18 months of any tenancy, regardless of the number of applicants. If the tenancy ends before 18 months, the outstanding balance will be paid. The average monthly cost after tax is £17.69. Please note that all costs include VAT.
Fixed-term tenancy renewals are charged at £50. Given the government’s drive towards longer tenancies and the removal of the option to use Section 21 ‘no-fault’ notices to end a tenancy, we anticipate that tenants will prefer having rolling tenancies in the future, resulting in fewer renewals.
Legal Expenses and Rent Protection Cover:
We strongly recommend that landlords take out legal expenses and rent protection cover, as the recent legal changes have reduced the leverage landlords have to persuade tenants to pay their rent. As a result, landlords are more likely to need to take formal legal action to recover unpaid rent or evict tenants who do not pay.