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

Michael Jones

15:35 PM, 5th December 2016
About 3 years ago

Reply to the comment left by "Rod Adams" at "28/11/2016 - 10:26":

The total cost to the tenant for renting a property in the market ( i.e. the revenues of letting agent and the landlord ) is likely to be unchanged whether all be raised as agent's letting fee ( past ) or landlord fee / increased rent ( future ). To bring overall cashflow back to yesterday, the letting agent may consider introducing a fixed fee to the landlord in the 1st month ( this replacing the funds previously received from the tenant ). Afterall , the letting agent still has all of their operating costs to finance. At the end of this process the whole may result in unintentional uplift with the tenant bearing the increased burden. The ripple remains to be evaluated , a person did say ... ' don't buck the market ' !

Gary BTLowner

13:24 PM, 7th December 2016
About 3 years ago

I expect agents will add this charge to the landlord, so I shall simply charge an equivalent sum to incoming tenants to offset it.

Gary Nock

13:44 PM, 7th December 2016
About 3 years ago

Reply to the comment left by "Gary BTLowner" at "07/12/2016 - 13:24":

I agree Gary. Only what will happen is that if a landlord is charged an extra £120 on a 6 months tenancy then technically what will happen is that £20 a month will be added to the rent. But if the tenant stays beyond the 6 months and the landlord does not reduce the rent (!!!) then the tenant ends up paying an extra £20 per month beyond that and ad infinitum. So the tenant ends up paying more for the referencing than he would have done in the first place. Brilliant Mr Hammond. That will really help the JAMS - who will have jam today or so they think as no upfront fee- but none tomorrow as they are spending it on extra rent.

Jim Taliadoros

0:38 AM, 10th December 2016
About 3 years ago

Reply to the comment left by "Rod Adams" at "25/11/2016 - 09:14":

£1200 or 10% is not peanuts. The amount of money some letting agents collect for the amount of work they do is quite shocking. Self management.......the way to go.

bob the builder

11:51 AM, 12th December 2016
About 3 years ago

I am self managed but have always charged a fee, which I would then use towards furnishing the property which is a big help to the Tenants (as I have all flats) and although I suppose I can still technically charge as I am not an agent I suppose it will become unpopular to do so. I will from next year change to unfurnished which will leave me better off and a lot less hassle but of course I am sure my Tenants will be only too happy with this change for the better for them.

Luke P

12:00 PM, 12th December 2016
About 3 years ago

Reply to the comment left by "bob the builder" at "12/12/2016 - 11:51":

It is believed the wording of the legislation will mirror that of Scotland's, which as I understand also includes individual landlords.

Gary Nock

12:11 PM, 12th December 2016
About 3 years ago

Reply to the comment left by "bob the builder" at "12/12/2016 - 11:51":

Bob it all depends on what the tenants got for their referencing fee. If the tenants paid a couple if hundred quid in referencing but for that got all the white goods - fridge, washing machine, tumble dryer etc then £200 was a bargain for the tenants who would have to fork out three times that. So another example of the banning of letting fees costing tenants more money. Landlords will cut back on furnishings, repairs etc to try and claw back any additional agency fees. Hammond and May just don't understand that the tenant gets a service as well that has to be paid for somehow. There's no such thing as a free lunch...or fridge freezer.

Graham Bowcock

13:06 PM, 12th December 2016
About 3 years ago

Good afternoon

It is an interesting concept that landlords can miraculously increase rents to cover increasing costs of compliance and possible additional letting agents' fees. I am sure that in some areas it will not be that straightforward. Rents are dictated by the local market and are irrespective of landlords' costs. Landlords in general have been fortunate in the past few years as rents have being rising in many areas so this absorbs the increasing costs. Don't forget that mortgage rates are very low, so the ability for landlord's to make a profit should be at its best.

What will happen to the market is that the compliance and cost issues will force many landlords to leave, thereby reducing supply. It is for this reason that rents will increase, not by simply re-charging costs on to tenants.

Ultimately the tenant will always pay - that is the nature of business. Any customer of a well run profitable business is paying and the rental sector is no different. It is with this in mind that I think the Government is wrong in penalising landlords and leading to an inevitable reduction of the sector.

The Government fails to recognise that the UK sector is mature. People rent for a variety of reasons - employment, family, flexibility, etc. and it's not all just about not being able to buy a house. Many of our tenants like being able to phone somebody when their roof leaks or the washing machine breaks down to get things sorted for them.

Graham

Mark Alexander

13:36 PM, 12th December 2016
About 3 years ago

Reply to the comment left by "Graham Bowcock" at "12/12/2016 - 13:06":

Excellent explanation Graham
.

Gary Nock

13:39 PM, 12th December 2016
About 3 years ago

Graham I fully agree with your very balanced assessment. A pity you are not a Treasury Adviser. But you are probably over 22 and not a member of The Green Party or Generation Rent.

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