News leaked just hours ahead of Philip Hammond taking to his feet to deliver his first Autumn Statement, confirmed that the Government is to ‘ban’ letting agents charging fees to tenants.
It remains unclear exactly what ‘banning’ will mean in this instance, as UKALA is reliably informed that the consultation on such measures is yet to be written.
However, it is likely to be a blow to many working in the industry. Not least in terms of the hit many smaller agencies will take in cash-flow terms.
Following the enactment of the Housing and Planning Bill the Department for Communities and Local Government (DCLG) has led a working group on affordability in the private rented sector, a major agenda item of which has been letting agent fees; their use, impact and how to combat their worst excesses where it occurs. To date no conclusions have been reached, and we understand that the group’s discussions will inform the consultation process, expected in the New Year, but there is little certainty about the form this measure will take.
In Scotland the approach has been to implement a ‘route-one’ ban, simply relying on a long-standing bar on premiums. However, this fails to recognise numerous nuances of the system and does nothing to prevent prospective tenants from gaming the system to their advantage with no potential financial penalty for abusing the system.
Unsurprisingly, prospects for a ban on fees was high on the list of concerns highlighted by UKALA agents when surveyed earlier this year.
To quote just a few agents, they told us:
“Fees are an important part of our business model. If they stop fees as in Scotland it will hurt our business. We need to be paid for the time and costs in carrying out references etc.”
“A Blanket ban on all tenants’ fees would mean rents would rise. Our fees to landlords will have to increase, so the landlords would need to recover that money somewhere. Plus all the upcoming tax changes that landlords experiencing.”
“Abolishing tenants fees would be detrimental to all concerned we are not a charity and we have enormous costs to run an agency properly and fairly.”
The question of course is; how damaging will this ban be?
Most UKALA agents told us that they routinely charge tenants in respect of referencing, check-in and check-out with fees varying, but typically in the region of £50 to £100 per tenant. In most cases, difficult to describe as excessive but a significant loss to businesses if banned outright.
Bearing in mind that the Government may ban fees, but can do little to eliminate the costs they are intended to cover it remains to be seen what the majority of letting agents will do to ensure their costs are covered and margins maintained.
How will you cope: