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February 21, 2017 Landlords

Tenant Letting Fees ban unlikely to be introduced until 2018

In the Autumn Statement 2016 the Chancellor announced the Government planned to ban letting agents fees to tenants “as soon as possible”.

A consultation will take place soon, the Government will consult with industry bodies, many of which are opposed to the ban but we think the Government are determined to get this through regardless. However, it does not look like the ban on tenants’ fees will be implemented until 2018.

A few agencies out there have been profiting from extremely high tenant’s fees for years and getting away with double charging landlords at the same time for the same admin services. The industry was expecting a cap on fees to be implemented, but it is these agencies that have caused the result of a complete ban. This follows Scotland, who banned tenant fees in 2012. In England and Wales, agents have to legally publicise their fees on both their website and agency premises, as required by Trading Standards since last year, although it appears from our research that hardly any of the larger agencies are actually doing this. As an independent agency that started out small a decade ago with a charge of only £35 for referencing fees, we have strived to keep ours costs low for tenants. As we have grown and taken on more staff to carry out the administration and referencing we have had to raise our fees to cover extra costs, but have always tried to keep them reasonable and above all – transparent.

“A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market,”

David Cox, managing director of the Association of Residential Letting Agents.

We believe that reasonable tenants fees are fair, as they reflect admin work actually carried out by agencies, however we have always strived to keep the costs to a minimum. Since just before the general election we changed our processes to charge our landlords for the inventory and check out reports as standard, unlike most other agencies that make a charge to the tenants for one of the services at least. However, some of our landlords do insist we charge their tenants up front for the check out instead, and at the moment we have to take instructions from them on this.

Once the ban comes into force in 2018, all the fees for referencing, all admin and inventory/check out/in services will be charged to landlords instead. We do foresee that this will result in tenants paying higher rents as the landlords seek to recover another rise in their costs after the income tax changes were also implemented. It will be tenants who may loose out longer term, paying a slightly higher rent every month, this has been apparent already in Scotland:

“Since the ban came into effect in Scotland in 2012, we’ve seen rents rise quite significantly. According to official Scottish government statistics, average rents rose by 4.2% in the first 12 months after the ban was enforced, and for the same period in England, rents went down by 0.7%, so we do see quite a stark difference north and south of the border.”

David Cox, managing director of ARLA

A complete ban may also result in landlords being less willing to release tenants early from contracts or to allow tenant swaps, as these attract a fee to cover the time spend on the administration which is currently charged to the exiting tenant.

Until further clarity, we carry on as we have always done previously, charging reasonable referencing fees to our tenants… watch this space.


Posted by Claire Empson, Founder Daisy Lets & Sales

 

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