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News - 2 May 2014

Annual rent-increase cap proposed by Labour

The Labour leader, Ed Miliband, has said that a future Labour government would cap rent increases in the private sector and scrap letting fees to estate agents to give a "fairer deal" to tenants.

Labour will also call for longer, securer tenancies and rental charges of up to £500 to be axed.

The Conservatives said evidence from other countries suggested rent controls lead to "poorer quality accommodation, fewer homes being rented and ultimately higher rents".

Speaking in north-east London, Mr Miliband said: "Nine million people are living in rented homes today - over a million families. That is why a Labour government will take action to deliver a fairer deal for them too."

Under Labour's plans, landlords and tenants would agree initial rents based on "market value" and, thereafter, a review could only be conducted once a year.

Christine Matthews, Property Manager at ABDS comments
“While landlords would still be able to increase what they are charging following changes in market conditions, there would be an "upper ceiling" to prevent rent hikes out of step with the overall market. The threshold would be based on an industry benchmark of average rent rises. The Royal Institute of Chartered Surveyors is currently considering what an appropriate figure would be.”

Estate agents would also no longer be able to charge a letting fee for renting out properties in addition to requiring a deposit and the first month's rent upfront.

Rules on tenancy agreements would also be changed to give more certainty to tenants wanting to remain in their properties for an extended period.

As now, a tenant would be able to terminate a tenancy after the first six months, with one month's notice, but a landlord could only do so with two months' notice and if certain conditions were met.

After the six-month probationary period, contracts would automatically run for a further 29 months.

Housing charity Shelter welcomed any move towards more "modern, stable rental contracts" but the Institute of Economic Affairs said rent controls would distort the market and create "perverse incentives" for landlords in areas where market rents rise quickly.

If you need any help and advice on the implications of Property Ownership, Letting and Taxation, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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Great with people  
Clear and precise with advice
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In touch with issues that face our clients
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