Now that the dust has settled it is worth taking some time to reflect on the Chancellor’s letting fee bomb shell. There has, quite understandably, been a lot of quite forceful reaction to the announcement, some more founded in reality than others but almost all founded in the fact that this will be a major change to the way in which most of us do business.
It has been described as everything from the end of life as we know-it, to a great opportunity for innovation and ethical practices.
Tails of woe and businesses with no options in a post fees environment to flee the market have come to the surface, at the same time there is a certain smugness to be found in the offices of those who have never relied on especially high fees and profess to have seen the writing on the wall some time ago.
The one common, and impressive, factor is that none of these commentators have any information about what the proposed ban will look like. I can say this with reasonable certainty as the civil servants responsible for drafting the proposals haven’t done so and have been quite open about the fact that they are firmly in ‘listening mode’.
Having now had a lot of conversations with the Treasury, DCLG and others in government about this we are in a position to make some predictions however. Of course our predictions could prove wildly inaccurate – but to poorly paraphrase the late Richard Nixon; it is not lying if what I say now proves, in hindsight, not to be true.
So, prediction time:
(1) This ban will happen. We’re hardly going out on a limb right now, but it is not unheard of for government announcement to disappear without a trace. I could name a few made by recent chancellors in fact – but I wouldn’t want to remind anyone.
(2) A ban will mean a ban. By this I mean I would be surprised to see a great many exemptions, probably none-at-all. It is also very unlikely to allow deferment of payments or cunning repayment plans.
(3) A fee is not a deposit. There is no reason (at the moment) to assume that this will prevent agents (or landlords for that matter) from taking a holding deposit on the condition that referencing is passed and applicants comply with any reasonable terms and conditions. OF course this will not then be retained subsequently in lieu of a fee.
(4) It will most likely be limited to fees required in order to secure or maintain a tenancy. The Government are alive to the fact that agents legitimately make maintenance, or out of hours assistance, charges during tenancies. These are quite likely to be excluded.
(5) We are unlikely to see this become a reality before the Autumn of 2017 at the earliest – it could even be 2018.
So what now. In part all agents can do is wait and see. A consultation will be launched next year, which all affected agents are encouraged to contribute towards.
However, in the mean time it may be a good time to look at business models. After all of the fanfare of this announcement landlords and tenants will be on their guard. Landlords are nervous that their commissions will go up, many tenants are already expecting zero fees. Rather than wait for the cliff-face the smart money says it is time to look for ways to capitalise on expectant applicants and wary clients by offering something which gets ahead of the game.
It might also be worth preparing for a time when a valuable line of cash flow is removed from the equation.