Tenant Fees Banned
Tenant Fees Banned
In the latest intervention, (or interference, if you prefer), in the private rented sector, the government is consulting on placing a ban on letting agents charging tenants fees.
Though it is letting agents who were specifically mentioned by new suit Chancellor, Phillip Hammond, in the Autumn Statement, we expect that this ban will also apply to landlords who operate direct (say, via an online letting agent).
And though it is “subject to consultation” the ban looks a bit of a shoe-in to me.
I have to say the lettings industry sort of “had it coming” here. Too many of them have been in the habit of charging tenants too-high fees, when of course, they were also charging landlords for the same services.
It is a shame, though, that the ban would presumably apply to the cost of and work involved in carrying out basic reference checks, though one might ask, how could this be allowed for and controlled anyway?
And so, the government looks set to follow the Scottish example and ban all letting agents and landlords from charging any sort of fee whatsoever.
Letting Agent Fees
Actually, the whole thing is unnecessary, in our opinion.
We wrote back in April of this year that the problem was actually lack of clarity on fees and a failure of transparency. We explained that it was madness that the law did not mandate that the likes of the portals, (Rightmove, Zoopla and others), should have to display tenant fees on their advertising listings. All they did for most ads was just place a tiny notice saying “fees apply” on the listing, which is pretty pathetic we think. (See the link to our blog post on this April.)
In that post, we explained that as the portals are the places that maybe 70% of tenants look to find property, this was a huge omission in the law. And that was a problem because too many of the actual letting agents who advertise on the portals, (which is just about all of them), were not exactly busying themselves telling applicant tenants what the fees were.
So, as I say, the letting agency industry have themselves to blame – and once again the government has implemented a big change when all they had to do was force the portals to display the fees. If they had done this, the tenant-applicant would see exactly what the fees were at first contact and would behave like any rational consumer by going to those letting agents / landlords who charged no fees at all (or only low fees that simply reflected the cost of doing reference checks, say).
In other words, people like us. We have only ever charged a maximum of £50 for the first applicant and £35 for each other adult applicant. We make a big thing of this in our advertising too. We found that tenant applicants liked it and liked us too because we did not charge rip off fees that were far and away above the cost of the service provided.
But in future, thanks to the government, it seems we will not be able to make ourselves stand out in this way.
So, once again the government has implemented a draconian measure which was not needed.
Once again, they have implemented the wrong policy.
Once again they have failed to put in place a system in which tenants viagra or cialis could act as rational consumers.
So, no news there then.
Higher Rents Will Follow
What will happen now?
Well, letting agents will just raise fees on landlords. Most landlords will have to accept it and most of them will pass most of the cost straight on to the tenant in higher rents.
Some landlords, maybe 5% of them at most, will think about cutting out the full service high street agent and go to far cheaper online letting agents to get advertised on the portals – and then do the rest of the work that the letting agent would have done themselves, if they can. So, there may be a tiny benefit to tenants in terms of lower rents, but that is all.
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Yes… this is yet another bad move by the government for landlords, however I very much doubt it is a mistake.
The government is VERY well informed in these matters, they know very well that this will obviously force landlords to raise rents. The government have made o string of changes for landlords lately which forces them to raise rents due to increased costs of doing business.
But why do they want rents to be more expensive? Its not like the average tenant can just say “screw this” and head out to buy a house of their own instead.
If they had money for a deposit and were eligible for a mortgage they would have likely got a house already. So whats it all about?
Hi David, as a private landlord dealing with tenants directly for HMO’s, carrying out the reference checks and admin directly without the services of a letting agent, I presume I would also be affected by this change ?
I would have said “Yes” but Tessa over at LandlordLaw (and James at Upad) says it may not
We will have to wait result of “consultation” to see details and to find out for sure.