
BEST PRACTICE SPONSOR 2020
19RESIDE MANCHESTER |
Tenancy agreements
In 2019, there were plenty of changes
and challenges for the estate agency
industry. June saw the introduction
of the Tenant Fees Act, which the
government introduced to effectively
stop charging tenants fees in respect
of referencing, administration, drawing
up tenancy agreements and all other
costs related to the initial renting of
aproperty.
While in principle the intention
to reduce initial upfront costs to
prospective tenants is laudable, many
of these initial costs are necessary, such
as referencing and right-to-rent checks.
Therefore, these necessary costs will
now be passed on to landlords. The
effect of this act will be to push rents
upward, thereby not helping a tenant’s
financial status in the mid to long-
term whatsoever. Landlords will look
to recoup these costs in the only way
now available to them – increasing the
rent at renewal or new tenancy stage.
The buy-to-let market has seen a
significant decline in transactions in
recent times. This is primarily due to
the changes in government taxation
policy, including the cessation of
mortgage interest, tax relief and the
stamp duty surcharge on investment
properties, making further investment
in the residential market less
favourable for individual landlords. This
also actively encourages institutional
landlords to step in to solve the
housing crisis with an ever-growing
emphasis on the build-to-rent market.
Furthermore, with the burden of
increasing regulation, to include new
EPC regulations, Section 21 changes,
the aforementioned Tenant Fees Act
and licensing in many areas, we are
seeing fewer individual landlords
entering the marketplace and an
increasing number exiting the market,
benefiting from substantial capital
gains and selling up.
On the market
This previously envisaged source of
cheaper older, rental stock was in
theory meant to furnish the first-
time buyer sales market, and keep
the whole market moving. With the
tightening of the mortgage market,
however, along with stricter lending
policies surrounding exterior rainwater
cladding, ground rents and overseas
investor take-up, this intended
consequence has not been seen.
Indeed, the volume of transactions has
fallen, with the market expected to
slow down further.
If this older, previously rented stock
does cascade down into the sales
market, it will remain in the rental pool
and restrict the flow of tenants toward
the institutional build-to-rent stock,
hindering the market.
The government backed the Help
to Buy scheme, which also ceases
in its current format in April 2020,
thereafter, only being available to
first-time buyers rather than home
movers. The latest statistics from the
government’s website confirming
46,302 transactions were completed
in 2017, of which 37,481 were
completed to first-time buyers.
Thismeans we will see a 20 per cent
Excelsior in Castlefield,
by Mulbury City
Policy alone
cannot solve
the housing
crisis; in fact,
it often makes
matters
worse
“
“