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

Mandy Thomson

9:43 AM, 23rd November 2016
About 3 years ago

Yet another ill conceived, trigger happy vote pleasing policy.

This will discourage new landlords, and while some might say "great", where is the replacement housing coming from that is needed now?

As a tenant, I faced high agent's fees, aside from the holding fee, deposit and first month's rent, and they did seem excessive at the time.

However, a more reasonable policy would be to restrict agents to charging only their actual costs up to a certain amount.

Steve Masters

10:08 AM, 23rd November 2016
About 3 years ago

Like it or not there are considerable costs when a tenant leaves and a replacement has to be found.
As the vast majority of tenancies are ended by the tenants not by landlords or agents, it is not unfair to expect the tenants to pay for at least some of those costs.
Like Mary suggests, a far better law would be that only actual costs incurred can be passed on to tenants and agents or landlords must show a breakdown of the costs if requested.
If the change of tenancy costs are passed back to the tenant in the form of higher rent then long term tenants will be subsidising short term tenants, when it should be the other way round. That's hardly fair.

DC

10:11 AM, 23rd November 2016
About 3 years ago

Reply to the comment left by "Mandy Thomson" at "23/11/2016 - 09:43":

I echo your thoughts entirely, having been on both sides of the tenant/landlord fence.
Plus having also worked for one of the big ARLA corporate letting agents whose fees were certainly much in excess of the imaginary £202 per tenant average quoted in this article the writing has been on the wall for some time.
I can see this plan prompting another reason for landlords, that depend on letting agents, to sell off their portfolios.
I no longer live in the area of my portfolio so am reliant on a local letting agent to carryout all the necessities to source the right tenants. Their fees are already well below the average to tenants and do not include anything other than the monthly fee to the landlord so I await with dread what it's going to cost me.
Having implemented Sec 24 rent rises to in-situ tenants for the first time last November and again this November I am running out of capacity to add yet more rent onto my tenants and don't want to either.
Unfortunately this is definitely heading towards rent capping by the authorities as well so there is massive change ahead for us I feel.

CazT

10:15 AM, 23rd November 2016
About 3 years ago

I'm an iPad user and I've been having the same problem with the header, thank you Gary for bringing this up and thank you Mark for getting it sorted asap. With regard to the leak - it is truly becoming a pain on the butt being a landlord! Will these attacks on us never end!! ??

AA

11:09 AM, 23rd November 2016
About 3 years ago

That would constitute an admission of applying up front fees and thus null and void.
You have to learn to play the game. Make the tenants acquire their own credit report. Charge tenants when they request a forwarding reference. And the remainder - build the administration into the rent. So next rent increase will consist of non allowable fees, revocation of the depreciation allowance, graduated revocation of interest claimable, inflation and demand as landlords sell up. But as a private landlord I have never ever charged anything for the works outlined.

Mandy Thomson

11:34 AM, 23rd November 2016
About 3 years ago

Reply to the comment left by "Asif Ahmed" at "23/11/2016 - 11:09":

I would be concerned about having tenants apply for their own reference, as when I reference I want an extremely thorough job done, such as conducting a credit check against all addresses revealed, and an explanation for any gaps.

If I were asked to order my own report for whatever purpose, I have a vested interest in ensuring that report shows me in the best possible light - that's human nature.

Gary Nock

11:41 AM, 23rd November 2016
About 3 years ago

As is stated elsewhere on this thread, this is another attack on the PRS by a government that does not understand basic business or what being a landlord or a letting agent is about. The cost will be passed on in the form of higher rents. So if a landlord gets charged £120 referencing fee by an agent he will put £20 on the monthly rent for a 6 month AST. If the tenant stays for 12 months then instead of paying £120 then it's £240.And rent increases will become the norm every 6 months rather than landlords not touching them for years. I have one tenant who has been in 14 years. Her rent has recently gone up £20 in that time due to preparation for Section 24 and is still £40 a month below market value. So now it will be going up over the next 3 years until it reaches todays market rent. But by that time rents have gone up again.
And how about tenants who make multiple applications knowing the landlord is paying for the reference. What is to stop them pulling out even if they have passed everything?

Do we take 50% of the first months rent to reserve the property, refundable against the first months rent UNLESS having passed all the referencing process they then pull out. Will the new ban allow this? Will it be seen as a "fee"? How do they get on in Scotland?

What a bombshell.

Mark Alexander

11:47 AM, 23rd November 2016
About 3 years ago

Reply to the comment left by "Mandy Thomson" at "23/11/2016 - 11:34":

I agree Mandy, I also want the tenants referencing to be done by an RGI provider who are prepared to put their money where their mouths are by providing Rent Guarantee and Legal Fees Insurance on the back of the tenants they approve.

Nothing to stop a landlord insisting on a tenant getting a reference from a particular provider though from what I understand
.

Gary Nock

12:02 PM, 23rd November 2016
About 3 years ago

Hi Mark. We just have to be careful as some RGI Insurers insist on the reference being done within 30 days of the commencement of tenancy. You know what will happen. Tenants will be touting round old references which will be out of date.

Mark Alexander

12:09 PM, 23rd November 2016
About 3 years ago

Reply to the comment left by "Gary Nock" at "23/11/2016 - 12:02":

Yes of course, landlords will need to insist on new ones on this basis. Also, if a tenant has a reference from a company they don't usually deal with I cannot see how they can be compelled to accept it. They will be perfectly within their rights to insist on tenants providing a reference from their chosen provider.

I suspect the referencing industry will be forced to adapt quite significantly if it needs to provide referencing for tenants directly. Will the referencing companies also be told they can't charge tenants for referencing reports I wonder?
.

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