CHANCELLOR ANNOUNCES PLANS TO BAN LETTING AGENT FEES TO TENANTS IN ENGLAND
As part of the Government’s Autumn Statement, the Chancellor of the Exchequer, Phillip Hammond, confirmed plans to ban letting agents’ charging fees to tenants in England. The actual details of this important announcement are as yet undecided as the Department for Communities & Local Government is to engage in consultation before bringing forward legislation, so Flick and Son intends to play a large part in the consultation process, along with our professional and trade bodies.
The practice of charging tenants for processing applications to rent properties is long established. Tenants and consumer associations are now questioning this practice saying that charges are unfair and that in an unregulated industry, a small number of rogue agents overcharge tenants for the services provided, hence the Government’s intention to ban charges.
The consultation process announced by the Chancellor will involve a host of stakeholders such as our professional body, the Royal Institution of Chartered Surveyors and our trade bodies such as the Association of Residential Letting Agents, as well as consumer organisations such as Citizens Advice and tenants’ lobbying groups so the process is likely to take well over a year before the government will actually decide on its policy and enact legislation.
Flick & Son, as with all reputable letting and managing agents, charges tenants applying to rent residential properties which we manage on behalf of our many landlord clients. Two tenants applying to rent a property together normally pay £200 each to cover our costs but the charge can be higher when tenants’ applications involve us in dealing with Housing Benefit issues or obtaining guarantors. The average fee charge by agents licenced by the Association of Residential Letting Agents is £202 per tenant, an amount defended by ARLA as being very reasonable and far from exploitative.
Critical checks covered by the fee charged to a tenant before letting a property include checking tenants identity, confirming immigration and visa details, undertaking financial credit checks, obtaining references from current or previous employers and landlords, obtaining relevant information to assess affordability before agreeing terms for the tenancy agreement and producing the tenancy document. We also meet every prospective tenant at the property they are intending to rent to test smoke and CO2 alarms in the tenant’s presence and to go through the tenancy agreement and inventory with the tenant before they sign the tenancy agreement. At the end of the tenancy the £200 we charge each tenant is inclusive of a contribution towards preparing a Schedule of Condition to check against the inventory prepared at the start of the tenancy and of administering the repayment of their deposit.
By charging tenants for these services, letting and management agents are able to spread the administrative costs involved in letting residential property between the tenant and landlord, whereas the Government’s proposals look to load all the costs on landlords, costs which have increased substantially over the past five or so years due to the Government introducing ever more regulatory requirements.
David Cox, Managing Director of the Association of Residential Letting Agents says: “A ban on letting agent’s fees is a draconian measure and could prove to 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 proposal (to ban tenant’s fees) is a crowd pleaser which will not help renters in the long term. All of the implications need to be taken into account.”
The Royal Institution of Chartered Surveyors believes landlords are being treated unfairly in these proposals. "There is no doubt that Britain’s landlords have the potential to be the solution to our housing crisis not the cause," says Jeremy Blackburn, Head of Policy at RICS. "It is simplistic to suggest that landlords must pick up letting agency charges when the country is in urgent need of more landlords entering the market. The proposal is a little like robbing Peter to pay Paul. Government must strike the right balance between allowing credible, regulated letting agencies to recover reasonable costs and the unquestionable need to protect tenants from suffering excessive charges by less scrupulous agents.”
We at Flick and Son entirely agree and will work hard over coming months to represent our landlord clients throughout the consultation process.
Helen Brewster ARLA
Director, Residential Letting and Management, Flick & Son