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Ban on agents' letting fees – is there a power shift towards tenants?

New research from Fixflo shows that nearly 42% of all agents in the UK believe the looming letting fees ban will be the biggest challenge to their business this year. This is no surprise considering there is a real fear that the letting fee ban will lead to job cuts and will significantly reduce letting agents’ income.

So is the future bleak for letting agents and is this ban good news for tenants?

Lettings agents make significant profits on every new tenancy. According to Open Rent, letting agents are making 473% profit on some fees. It found that the real cost of referencing a tenant is £15 and yet recent government research indicates that on average, it costs £86. There is also a huge profit on the average cost of a tenancy renewal which is £85, but by using a calculated cost based on it taking ten minutes to check a renewal contract and an average negotiator salary of £20,000, the real cost is £4.


These costs represent significant profits for letting agents and it looks like they will be wiped out when the ban comes into force. This appears to be a victory for Shelter, who has been calling for a ban on letting agent fees since 2013. Government figures show that tenants pay on average more than £200 in letting agency fees, on top of rent in advance and deposits. Shelter found even higher average costs and that one in seven tenants have been charged more than £500.

There have been numerous media reports on the implications of the forthcoming ban, and the inevitable is that the costs will still have to be paid by the tenant in one form or another.

In reality, landlords would only need to raise rents by £41.66 per month to cover the letting agents’ fees over 12 months, based on an average of £500.  If a tenant stayed in a property for two years, the landlord would receive an additional £500 a year in rent and the tenant would be paying double the fees.  Over a five year tenancy, tenants would be paying £2,000 for the fees.  How is this helping tenants?  In the long run, tenants could be paying much more.

If the lettingmarket was regulated, there would be no need for a letting fees ban. The government could set caps for all the costs such as references, inventories, ID checks etc. This would ensure tenants were charged fairly. Shelter and the government could also concentrate on removing the unscrupulous accommodation providers.

It is naïve for Shelter and the government to think banning letting agents’ fees is in the interests of the tenant. Letting agents provide a valuable service to landlords and tenants and this has to be funded. 

Terry Mason is a director at Housing Hand.

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    Its so refreshing to hear someone say something good about the service agents provide.

    It seems where ever i go everyone seems to have pre judged me and that im a scheming con artist. This couldbt be further from the truth i work really hard to look after all my tenants and landlords.

    With all the added tax changes coming in that are causing so many landlords to sell up if they ban us charging let fees we will go under.

    I believe we are reasonable in the referencing fees we charge and on most references we put through i spend alot of time working with tenants to get them through this process.

    I dont agree with agents that will reference 30 different people at the same for the same property knowing that 29 of these people will have paid this fee for nothing and will be rejected even if they pass all the check and references.

    We also dont force tenants in to regular renewals every 6 months and give the tenant the choice to go on to a rolling contract which doesnt need renewing all the time and if they want the security of another fixed contract we ask them for a fee of £65 to cover our costs which certainly arnt £4 we have to prepare all the new paper work we then visit the tenants at home to complete this with them I often spend a good hour chatting with the tenants going over any problems they have and generally building a good relationship with them so this process can easily take a couple of hours of my time. I then have travelling expenses to and from the property and often have to pay to park once i get there. We have to make a small profit in the work we do or what would be the point.

    I think the answer has to be that these items are properly regulated to stop the agents that charge £500 to complete a reference that cost them £15.

    It think we need to look at the crippling fees that sites like Rightmove choose to charge us to advertise a property and the governing bodies we are forced to pay annual fees out to as unless we do so are not legal allowed to be a letting agent.

    Estate agents also make massive profits charging huge commission rates when selling a property and probably do a tenth of the work to complete this process than we have to carry out when letting a property to a tenant we have to prepare contract, ensure the property meets current safety regulations, we have to set up and protect the tenants deposit, provide them with prescribed information on this deposit, we have to check a tenants right to rent in the UK, take meter readings, provide the tenants with the governments right to rent leaflet, a copy of the EPC and Gas safety certificate, provide them with details on legionnaires disease and what to do in an emergency, carry out a detailed inventory, we have to go over where everything is fuse box, stop cock, show them how the boiler works. Tenants always have lots of questions when moving and and we spend time answering these question in detail with them and ensure they are clear on everything thats involved when renting a property. I quite often have to arrange things like parking permits once they have moved in.

    Its debatable who should be responsible for covering these cost but my point is not all letting agents charge huge fees for doing very little and many agents work really hard to meet todays lettings rules and regulations and the fees we charge are because we have no choice but to to cover our costs.

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    any fees charged by agents to landlords will be added in their entirety to the rent--same for licensing fees and extra tax under S24. Comments?


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