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TODAY'S OTHER NEWS

Scrapping agent fees set to lead to higher rents

Letting agents in England will be banned from charging fees to tenants under plans announced by the chancellor in his Autumn Statement, designed to shift the costs to landlords.

Tenants can currently be charged fees for a range of administration, including reference, credit and immigration checks, as well as the drawing up of tenancy agreements, with fees varying widely.

According to the charity Citizens Advice the fees cost an average of £337 per person, but the proposed change could encourage landlords to shop around for the cheapest agent, in order to avoid having to increase rents.

“The announcement by the Rt Hon Philip Hammond MP to abolish letting fees is a welcomed decision. By removing these costs, a fairer playing field will be created for the UK’s 4.3 million private renters,” said easyProperty's CEO Rob Ellice.

“Any sensible agency won’t pass on the charges to landlords, due to competition in the sector, so we don't foresee rent rises as there is no need to add the fees to rents,” he added.

But David Cox, the managing director of the Association of Residential Letting Agents, said it was “fair and reasonable” to charge tenants for administrative tasks.

“A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market,” he said.

The new chancellor is clearly aware of the pressures facing those living in the private-rented sector, but Richard Lambert, chief executive officer at the National Landlords Association, says that in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.

He commented: “There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long. Banning letting agent fees will be welcomed by private tenants, at least in the short-term, because they won’t realise that it will boomerang back on them.

“Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent. But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents”. 

Richard Price, executive director at the UK Association of Letting Agents (UKALA), believes that abitrary bans sound appealing as a quick fix, but the problem of affordability in the private rented cannot be addressed by preventing legitimate businesses from charging for their services.

He said: “A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.

“UKALA agents strive to provide a premium service which represents excellent value for money and this ban will place in jeopardy hundreds of professional businesses in order to deal with the few unscrupulous.”

While the ban on lettings fees still requires a government consultation before it is implemented, its impact on the UK housing market could be far reaching, according to Nick Leeming, chairman at Jackson-Stops & Staff.

He commented: “Affordability issues which surround purchasing homes means that for many, the only option is to rent. We’ve seen a consistent reduction in the number of landlords buying investment properties since April this year which means that fewer rental properties are now coming on to the market to serve the growing rental population.

“A better solution would have been to create a more competitive fee environment and ensuring that landlords are not further discouraged from the market.”

  • ken hume

    Some 20 years back, we did not charge tenants at all. Many agents pushed a large percentage of their fees back onto tenants instead of Landlords. This meant that they could charge lower fees to Landlords. We had no choice but to follow suit or lose market share. Some of them went on to charge tenants unreasonable amounts and then give the Landlords what appeared to be a great fees deal, whilst charging tenants who could ill afford the extra money. My fear is that some Landlords may look to cut extra costs by compromising on safety checks. Doubtless this is a headline grabber for the government looking to scapegoat 'greedy' Landlord and Agents but costs have to be met and will end up passed onto rents. However, in a sense they were already met by renters paying the charge. My solace today will be to watch the corporate agents share prices fall today as their lack of experience leads them to run around like headless chickens.

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    Just another cost to pass on to the tenants in the form of higher rents and additional charges. Those who don't like it, can rent somewhere else. Good luck with that.

    The lunatics are running the asylum. Sigh.

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    This has long since been the case in Scotland. Agents and Landlords cannot charge the tenant or applicant for key bonds, referencing checks, producing the lease, lease renewal or suddenly request double or triple the deposit amount at the time of application unless fully refundable.

    Its a pretty fair system, agencies and landlords have adapted, rents didn't go through the roof either; but what did happen is that most of the rogue agents and landlords were very quickly exposed due to their inability to keep up with legislation and because applicants became more aware of correct the procedures; this left mostly only those agents and landlords willing to adapt and comply in order to service the needs of PRS.

  • Carla Keegans

    We're in favour of scrapping tenant fees. We see too many examples of agents charging fees (often obscene amounts) to multiple tenants for the same property, knowing fine well they won't be giving the property to all but one of them. Let alone all the hidden extra charges. The lettings industry needs to adapt to the reality of the private rental market today, and as Stephen notes above; if this move puts rogue and inexperienced/unprofessional agents out of business, then all the better for tenants and landlords. What we'd also like to see is agents not legally allowed to operate a system of hidden fees to landlords too for managed properties. www.ethicallettingsagency.co.uk

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    It is right that agents should be able to charge the reasonable costs of preparing documentation and tenant checks. However, some agents are taking the p*** and giving the responsible agents a bad name, exactly as has happened with landlords where the actions of a few 'rogue' landlords have been used by the media to smear the reputation of reputable and conscientious landlords. My son is currently being charged £720 by Urban Spaces (a subsidiary of Countrywide I believe) for a 'Tenancy Arrangement Fee', which is absolutely outrageous and must be making them a profit of about £500!

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    We do the lot for £99 no hidden extras and no other fees but doing possibly multiple references if one fails doesnt seem fair on us

  • Kristjan Byfield

    Take it this means that next up mortgage application fees will be banned. After all, that is charging someone to assess if you can offer them a product which makes money- and these vary much like Tenant fees do across the country. Suuuurely on this logic, the bank/lender should cover this cost no?

  • Jason Roberts

    Rogue agents and landlords will, I'm afraid to say, always find a way to line their pockets and this proposed change in law will not affect them in the long run.

    There's nothing wrong with honest, hardworking agents charging tenants and landlords fees for providing a service. However, the service and the fees must be fair and transparent. We believe that fixed fees are fair and shouldn't be tied to the rental value of the property. It's also a lot easier to be transparent when the costs are always the same.

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    Why would landlords want to shop around if they are happy with their agent and the service they receive. The good agent will just shrug this off with advising their clients to increase the rent calculated on a 6 month basis but have minimum let periods of 1 year.

    As I see it agents will be able to charge for credit checks right to rent checks etc. but NOT to charge tenants for inventory checks in and out tenancy extensions and the like.

    If this allows landlords to increase their income who in their right mind would say no to this?

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    Absolutely correct decision by the Chancellor that tenants' fee should be scrapped. As the client of the lettings agent, the client must pay the agents' fees. Also the basis of a fair society must always be that those with the broadest shoulders - i.e. those with properties to spare and let out - must bear the greatest burden. To the landlord and lettings agent the property is a cash cow; to the tenant it is the very roof above their head. The agent should be happy with the fee agreed with the landlord, end of story. This has to cover admin. costs, tenancy agreement costs, etc. etc. etc. - it always does, with plenty left over for the agent as his/her profit. The tenant should only be liable for the agreed rent and agreed deposit. Let the market determine what rents landlords wish to charge - as has always been the case. Simple, really. And fair. (Do shops charge fees for selling their goods and services to their customers? - don't think so.)

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    Tenants were free to shop around

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    Yes but tenants' priority is the rental property, not the agent they rent from. It's not fair to say they can shop around letting agents, because it stifles the selection of properties they can choose from.

     
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    David Wirth...... Do shops charge fees for selling their goods and services to their customers? How naïve!

    If you spend £100 at a supermarket for items that have only cost the shop £30 they have charged you £70 for the privilege of buying those goods. The only difference is they have built their fees into the cost of the food. They, like letting agents do not work for nothing and have business costs that need paying.

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