Letting Agents will no longer be able to charge fees to tenants

by Mark Alexander

8:33 AM, 23rd November 2016
About 3 years ago

Letting Agents will no longer be able to charge fees to tenants

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Letting Agents will no longer be able to charge fees to tenants

Letting Agents will no longer be able to charge fees to tenants

HM Treasury has leaked an extract from the Chancellors Autumn statement which will announce that Letting Agents will no longer be able to charge fees to tenants

Whilst the Chancellors announcement will no doubt be treated by tenants as good news, industry bodies do not see it that way.

David Cox, Managing Director, Association of Residential Letting Agents (ARLA), said …

“A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market. It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account.

“Most letting agents do not profit from fees. Our research shows that the average fee charged by ARLA Licenced agents is £202 per tenant, which we think is fair, reasonable and far from exploitative for the service tenants receive.

“These costs enable agents to carry out various critical checks on tenants before letting a property. If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents. The banning of fees will end up hurting the most, the very people the government intends on helping the most.”

Richard Lambert, Chief Executive Officer at the National Landlords Association (NLA), said …….

“The new Chancellor is clearly aware of the pressures facing those living in the private-rented sector, but in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.

“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”.

Chris Sheldon. Managing Director of LettingSupermarket.com said ….

“It was only a matter of time before the legislation previously introduced in Scotland would filter into the rest of the UK so our business model was already prepared and ready for implementation. Our new fee scale to landlords will continue to be the most competitive in the Country offering full management for just 5% of rent (6% for properties inside the M25) and letting fees of just £100 per new tenant (£150 inside the M25). We will not charge for renewing tenancies for existing tenants”

Contact LettingSupermarket.com



Comments

Rod Adams

10:14 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Arnie Newington" at "28/11/2016 - 09:44":

The increase in rents in Edinburgh is not down to the various items you list. These are additional costs for the landlord but they have not increased rents. The increase in rents is purely driven by supply and demand, that's how the market works. Take the case of the Aberdeen market at the moment. Landlords here have seen the same additional costs but rents are down 25% across the board due to lack of demand driven by the collapse of the oil industry and additional supply as those who would like to sell are not realising their desired price so are leasing instead,

Regards,

Rod.

Luke P

10:16 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Rod Adams" at "28/11/2016 - 10:14":

I would agree that supply and demand play an extremely large part, but the additional costs from the list will have to be funded by someone, from somewhere (ultimately rents). Perhaps Aberdeen's rents would have fallen further if it were not for these additional fees...

Arnie Newington

10:21 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Gary Nock" at "28/11/2016 - 10:03":

There are already calls for rent controls and their is a provision in the new tenancy regime in Scotland for local to bring in rent controls.

They have rent controls in Stockholm and as a result their is a secondary market of sublet properties which is illegal and very expensive. To get a property legitimately in Stockholm takes half a life time.

The actions of the Scottish Govt. to the housing sector is a bit like the old song about there was an old women who swallowed a fly - every time they try to solve one problem they create another larger problem.

Arnie Newington

10:24 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Rod Adams" at "28/11/2016 - 10:14":

I think comparing the Aberdeen rental market which is volatile and based largely on the oil industry with the Edinburgh rental market which is very steady and predictable is wrong.

Again you can use Citylets data manipulation tools to prove this information on a graph.

Rod Adams

10:26 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Luke P" at "28/11/2016 - 10:16":

Hi Luke,

The additional costs are funded by the landlord. In the long term additional costs may drive out some landlords or restrict new entrants thus having a impact on supply but the timescales for this impact to be seen is many years. The notion that landlords can just put up rents to recoup these extra costs shows clear misunderstanding of free market economics and the reality of being a landlord. Edinburgh has been lucky that the supply/demand balance prevalent at the moment has recompensed landlords for their additional costs, but it is just luck.

Regards,

Rod.

Rod Adams

10:59 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Arnie Newington" at "28/11/2016 - 10:24":

The Citylets data will show what's happening to the market but it doesn't prove the cause. That is open to interpretation..

Arnie Newington

11:29 AM, 28th November 2016
About 3 years ago

Reply to the comment left by "Rod Adams" at "28/11/2016 - 10:59":

Just for interest below is a link to the City lets data on rents.

https://www.citylets.co.uk/research/datahub/

Most landlords in Edinburgh do not increase rents during tenancies and it is only when a tenancy ends that they will see how much they can expect to get in rent for a new tenancy.

As I mentioned previously rents were fairly stable in Edinburgh but as the Scottish Government have interfered in the market then rents have shot up.

It's a bit like if you drop stones into a tank of water and watching the water level increase. Replace government interference for stones and rents for water level and you get an idea of what has happened in Edinburgh.

Gromit

9:40 AM, 29th November 2016
About 3 years ago

“A new survey from online letting agent Upad found that 40% of landlords plan to increase rents if they are charged fees ….”

The research also revealed that 75% of buy-to-let investors have no plans to sell their properties, despite a barrage of charges inflicted on landlords over the last year, including the introduction of the stamp duty surcharge in April, the scrapping of the 10% Wear and Tear tax relief for landlords who rent out furnished homes, while mortgage tax relief is set to be phased out from next year.

James Davis, CEO and founder of Upad.co.uk, commented: “Once again a measure that has been brought in to punish landlords has come home to roost. "Due to the chronic housing shortage we face in the UK, the lettings market is under immense pressure and this attempt to help potential first-time buyers has actually done more harm than good.”

https://www.landlordtoday.co.uk/breaking-news/2016/11/buy-to-let-landlords-likely-to-increase-rents-to-offset-higher-costs

Marie

11:58 AM, 5th December 2016
About 3 years ago

Reply to the comment left by "Michael Jones" at "23/11/2016 - 17:39":

In London the standard fee by estate agents for Let Only is 10% of the contract plus VAT. So if the tenants are signing a 12 month AST at say £15,000 pa, then the estate agents will collect £1500 plus VAT from the landlord. Usually it swallows up the first months rent and part of the second month as well. If you are lucky you get a "reduced" fee of 8% plus VAT. Most agents will also want a relet fee of 4 or 5% plus VAT if the tenants stay on after the first year, for doing nothing.

David Price

14:50 PM, 5th December 2016
About 3 years ago

Reply to the comment left by "karin melbye" at "05/12/2016 - 11:58":

"Most agents will also want a relet fee of 4 or 5% plus VAT if the tenants stay on after the first year, for doing nothing."

Please do not exaggerate, they have to press the print button on the computer.

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