A leading property lawyer warns that removing risk mitigation strategies through new amendments to the Renters’ Rights Bill will make many tenants on lower incomes “unlettable”.

JMW’s David Smith, says although the Bill - to be debated tomorrow - aims to protect tenants, the knock-on effect of restrictions to taking rent in advance, particularly by amending the Tenant Fees Act (TFA) will be “hugely exclusionary” for those who cannot pass referencing and overseas students.

Amendments will also block the use of some guarantee products, explains Smith. The TFA prohibits requiring a tenant to take out an insurance policy or enter into any form of contract with a third-party, but this is allowed where it is as an alternative to something that is permitted by the TFA.

Offerings

“Currently the various rental guarantor offerings rely on the tenant being given a choice between a large payment of rent in advance or a third-party guarantee product,” he says. “Obviously, if the TFA has banned all forms of rent in advance then that is not a valid choice, so it will be really difficult for these third-party products to operate at all.”

Graham Hayward, guarantor service Housing Hand’s MD (pictured), believes the proposed changes make it clear when a guarantee can be used rather than the confused mix of paths faced by tenants when trying to get their rental home secured.

Understanding

“Our current understanding is that the insurance policy mentioned is the existing cover that is available to accommodation providers and is paid for by them,” he tells LandlordZONE. “In effect, going forward, the market risk protection gets split for HMO tenancies.”

One option for accommodation providers is to take a deposit (five weeks’ equivalent) and one month’s rent plus the insurance policy, while the second option is for accommodation providers not to take a deposit or any upfront rent but to have a guarantee from either a person or a company guarantee, says Hayward.

“Overall, this is about risk appetite for the accommodation providers and how they want to protect rent collection.”

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