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Letting fees crackdown may deter many landlords from using agents

The government’s plan to ban letting agents in England from charging fees to tenants will deter up to 30% of buy-to-let landlords from using an agent to rent out their property, fresh research shows.

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. But many landlords fear that if tenant fees are banned, these costs will simply be passed on to landlords, and that is likely to discourage use of letting agents, according to Paragon’s latest Private Rented Sector (PRS) Trends report, based on interviews with a panel of over 200 experienced landlords, 

Ultimately landlords do not profit from tenant fees, and with landlords already facing a tax and mortgage squeeze, they are likely to see any major hike in fees as a catalyst to move their business elsewhere, or to simply ditch letting agents and go it alone.

The study by Paragon found that 73% of landlords currently use an agent or third party to let some or all of their properties. Of those, 12% said they would ‘definitely’ be discouraged from doing so if landlord fees were to increase as a result of a ban on tenant fees, with 18% answering ‘probably’.

The majority of landlords who use an agent or third party said they would not be discouraged from doing so.

The report also revealed 27% of landlords do not use an agent or third party to let any of their properties. Of those, 84% do not charge any tenant fees, whilst just 16% do.

The most common fees charged by landlords when letting a property without the involvement of an agent or third party are: credit check (60% of landlords), inventory (55%), referencing (54%) and tenancy agreement (42%), with 33% of landlords charging for other, unspecified fees.  

John Heron, managing director - mortgages at Paragon, said: “In the midst of ongoing turbulence in the Private Rented Sector, landlords have already had to navigate through challenging policy changes, and rethink their strategies accordingly.

“An increase in landlord costs as a result of a ban on tenant fees would be the latest in a succession of challenges and it’s unsurprising to learn that a substantial number of landlords might consider altering their approach to letting out their properties in that circumstance.” 

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    • 30 November 2017 10:41 AM

    If the government causes our excellent letting agents to pass fees on to us then we will pass them onto the tenants. I do wonder why this government hates tenants so much.
    We are already winding up next years rents ready to offset section 24.

  • Andrew McCausland

    There are various legitimate costs involved in establishing a tenancy and these have to be paid by someone in the process. If the law says tenants can't pay then either the landlords pay for agents to do the work, the landlords do the work themselves - or the work doesn't get done.

    Some landlords will take this on themselves and, although time consuming, will do a good job of it.
    My concern is that most landlords do not have the time, knowledge, experience or skills necessary to complete this themselves. They don't know the 150+ pieces of legislation that effect the lettings industry - or the implications of getting it wrong.

    Are landlords really aware that it is a criminal offence with a penalty up to 6 months in jail just for messing up the Right To Rent checks? I have an experienced owner (35+ years in the industry) who self manages who had not even heard of this legislation when he sat down for a portfolio review with me. Is that acceptable? No, but he is not alone.

    Some landlords will self manage successfully. My fear is that many will not have the time or knowledge to do this correctly. I see a bonanza ahead for the no-win-no-fee lawyers as tenants take advantage of the coming changes.

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    MPs are often lawyers--i feel that no legally qualification should ever be in charge of enacting legislation as they have a vested interest

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    when any business over heads increase it's the end user who pays the price, so it follows that rents will increase to cover these additional costs, government really thought this one through didn't they? shot in foot comes to mind.

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