Chancellor Philip Hammond has used his first, and it turns out last, Autumn Statement to announce a ban on lettings agent fees in England. The ban will come in “as soon as possible”.
Future Budgets will now be in the autumn, with a Spring Statement which it appears will be used as a monitoring device for the policies already announced.
Hammond also launched investment in housing worth just over £3bn.
The move, which comes days after Baroness Grender’s Renters’ Rights Bill passed the House of Lords committee stage, Hammond told MPs: “In the private rental market letting agents are currently able to charge unregulated fees to tenants. We have seen these fees spiral, despite attempts to regulate them, often to hundreds of pounds.
“This is wrong. Landlords appoint lettings agents and should meet the fees. We will ban fees as soon as possible.”
It comes despite housing minister Gavin Barwell previously signalling opposition to such plans. He has previously tweeted that fee bans are a “bad idea” as landlords would pass the cost to tenants via rent.
However, today he seemed to backtrack, stating: “It is the nature of the job that you have to defend current policy even when you are working to change it.”
It will be seen as a victory for campaigners such as Shelter but lettings agent and landlord groups have reacted with dismay. The buy-to-let industry is already coping with increased Stamp Duty, the end of the wear and tear allowance and the incoming rolling back of mortgage interest relief.
Research from property listings website The House Shop suggests that the average fees charged to tenants in the UK sits around the £300 mark, increasing up to £700 in some cases in London.
It said a letting agent will typically charge a landlord between 10-15% of their rental income for a full management service – so based on the average UK rent for October 2016 of £902 per month, this would equate to roughly £95 per month, or £1,140 over the course of a 12 month tenancy.
Adding in the additional costs of passing on tenancy fees (£300), this would increase to £1,440, or an extra £25 per month.
See some of the responses when reports of the announcements emerged earlier today.
Hammond also announced a £2.3bn Housing Infrastructure fund to build 100,000 new homes in high demand and a further £1.4bn for 40,000 additional homes.He said: “For many the goal of home ownership remains out of reach. The challenge is not a new one but the effect of unaffordable housing on our nation’s productivity is an urgent one.”
He also announced a regional pilot of Right to Buy for housing association tenants and said a White Paper on the “long term challenges” of affordable housing would be released “in due course.”
Mark Hayward, managing director of the NAEA, said: “The creation of 40,000 new homes that this new funding is expected to deliver is still painfully short of the number of affordable homes we need to solve the housing crisis and get first time buyers on the housing ladder.
“It is vital that the Government uses this to signal a radical rethink in its housing strategy and consider measures such as building homes on unused Green Belt land to really kick start the house building boom we badly need.”
Brilliant.
Define ‘as soon as possible’?
How to kill the Lettings Market in one stroke.
Why move now?
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Will this apply to company lets?
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This could take a year or more I suspect as it has to go through consultation. Its similar to the whiplash for lawyers changes in the last autumn statement which has U turned twice since and still isn’t sorted.
Absolute clowns, the lot of them. They have no idea what it takes to do this work and how long in man hours to get the tenant right. I heard on Radio 2 that someone emailed in to say its about time they stopped charging £500 to print off a contract. If only it was that simple. It takes my office an average of about 15 hours to work on the tenancy details and get it right. By the governments new living wage of £7.50 that’s £112.50 just to pay the staff member to do the work. That doesn’t take into account printing, heating, phone call charges, etc etc. We charge £200 + VAT, so we will “make” about £75 per tenant. We are a business not a charity. I don’t think that’s in any way excessive.
Another example of pleasing the crowd with no regard for who it destroys in real terms.
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Basically buying votes with other peoples livelihood – and it costs them nothing (in the short term).
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Sorry forgot to factor in the referencing costs. So even less than that we probably “make” £40 odd per tenant.
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Oh and tax!! Its slowly whittling away, like my will to live.
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Oh and I have to pay a contribution to that member of staffs pension because of the governments **** up. At this rate it will actually be down to zero.
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…15 hours to draw up the tenancy or to do the entire job (from viewing to move-in)?
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The whole job
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Question, previous statement said it only applied to England, now it is England and Wales. Is that correct? I note the governments own press release says it will be a saving of £233. Considering Government aren’t in the equation who are they making the saving for when they can’t get their own accounts in order. The current press release makes this whole thing one big loop hole. Landlords can charge tenants fees. Agents can charge landlord an admin fee. or rents go up as they did in Scotland. Case closed.
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Yet again a government that cannot see beyond the end of their noses! A few oinks wave placards, shelter jump on the bandwagon and government capitulate. Perhaps they think it’s clever to put people’s businesses at risk, jobs will go, rents will rise, landlords will try and cut corners.
I think we now need to start campaigning for the banning of fees by banks, mortgage companies &, solicitors!
I hope that every MP who is a landlord gets well and truly shafted. When they have tenants who refuse to move out because there’s nowhere for them to go or because they forgot to issue the how to rent guide or haven’t fixed a leaky tap I will laugh loudly!
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£5 million wiped off Foxton’s turnover in one fell swoop…
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I must be the only agent that is not too concerned. As I see it the corporate agencies have had landlord management set up fees in excess of £400 for a while now plus the 10 -15% management fees. I as a small family owned independent have been charging less than half of this for our set up fee, so now when I add in the reasonable tenant charges that I was making to the set up fee to help digest this scenario, I am merely charging an up front fee that is already considered reasonable to some landlords. Where as the corporate agencies are going to be hit the most, well I blame them in the first place for being here now!
Student and HMO agencies are going to be hit hard, try justifying an increase of landlord fees on an eight bedroom property!
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gardenflat, no matter what your charge is you still have to have the conversation with the landlord to say “your set up fee was £200 but we are now charging you £300” The landlords are not going to like it so they will do one of 3 things:-
1. suck it up and put it down to the way it is
2. increase the rent to cover the cost
3. Seek another agent that isn’t going to charge the uplift but by virtue, do a less than professional “quick” job leaving him open to problems.
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Valid points that I had thought about. It’s going to come down to education, ensure your client knows why these changes have come about, help them understand why you have had to take this move to increase the initial fee, show more expensive options in your local market place (and there will be some).
Perhaps we all have a number of clients that went with us as we were the cheapest option on the day, and perhaps we will never win them round with this but most of my clients have been filtered down to professional landlords who understand that a good service warrants a fair fee and with the right amount of education I feel we can work through this.
Having said that, option 2 is looking likely for allot of cases out there.
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Ah but look at it this way. You may have been doing well as your competitor was ripping off the tenant and landlords and you looked a good bet. Now you will find Mr Big is charging the same = nothing. You lost your advantage?
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Mr Big will not be prepared to wipe that kind of income from their balance sheets. They will need to make this up and my guess will be in management charges, I will always be able to decide on my feet and offer a more competitive and personal service.
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https://www.thesun.co.uk/wp-content/uploads/2016/11/composite-rental-fee-ban-recovered.jpg
Is there any reason they’ve banned fee’s….
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Balanced reporting from the Sun…. there are other places in the world that are not London.
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Good example of why we are here in the first place!
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Just seen the RICS have called Hammond the Listening Chancellor……
So basically those members of the RICS involved in Lettings can go and……. (add your own expletive.)
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Why not ban ridiculously expensive and exploitative survey fees?
I wonder what RICS’s view will be on that?
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I heard on the grape vine, that airlines charging admin fees and banks charging admin fees for signing a piece of paper are soon to be targeted! also lengthy telephone queues to HMRC are allowed to bill them for wasted time! also just in coitus is also due to be taxed!
A government who acts first and thinks later is a dangerous government!
A government who doesn’t listen to those who do the job day in and day out is a dangerous government!
Rents will just go up! with the ability of landlords not being able to claim the interest payments on there mortgages will in essence also raise rents!
Who will get the blame? greedy letting agents and landlords, it is not a way to stimulate and improve the quality of housing stock nor improve the services offered by letting agents.
You wouldnt go to the NHS and say you need to improve, oh and we’re taking some funding away from you! oh hang on a minute?!
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Here we have a government who one the one hand says they want to be ‘nice’ to tenants and make it easier for them to rent by not having them contribute to the costs of a professional service and yet on the other hand says they want to sell of the existing Housing Association rental stock by giving tenants the Right to Buy. Frankly I find that a bit underhand to put it politely.
Come on Mrs May and Mr Hammond this smacks very heavily of a time when I was very much younger and when Mrs Thatcher sold off the country’s ‘family silver’ i.e the nations council housing stock which was there to provide homes for people. Those chickens have come home to roost with a now, very low national stock of public sector housing available to rent.
I would have a strong suspicion that, just as previously, these Housing Assn homes will be sold at a discount with no claw-back so, as before, housing association tenants will be given the privilege of buying cheaply, wait a couple of years, then sell on the open market making a huge profit. Please, this time around make a claw back provision so that the discount plus a hefty % of the profit goes back into the Housing Assn coffers. Or better still DO NOT sell off the housing stock in the first place and keep those properties for those wishing to rent and who cannot afford to buy. Increase the national Housing Association stock of rentable properties and the private sector rents will eventually fall to stay competitive. Oh and by the way releasing funds to build another 40,000 homes of which only 25% will be affordable is not the way to ease any housing crisis and beat an ever increasing rents.
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Actually there is evidence that tenants are lent the money to buy the property by unscrupulous sources. As soon as the tenant cannot keep up the repayments, the tenant is evicted by the lender of said money, thus securing property at a discount for the unscrupulous source.
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I am not condoning what happened today, but just to play devils advocate I am guessing most agents operate on a % fee? I guess your management fees and tenant finder fees might therefore go up marginally which is when the rents will rise as landlords seek to reduce the impact on their income? And if rents go up at the expense of the renters, your fee income goes up, albeit very marginally?
So can someone more clever than me work out why the Gov. think it is a good idea to ban tenant fees apart from the obvious which is, it wins them votes and if you dont look past the end of your nose it looks like a good thing for tenants?
OR
Is it because the loss of VAT on tenant fees is a small price for the Gov to pay for the additional income now generated from the other end which is fatter rents and taxable income at a higher rate generated by landlords and shown on their tax returns?
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Check with Robert May, but Landlords haven’t been paying HMRC money that should be owed. So whether rent go up or down will have little impact on HMRC coffers, from a Landlord taxation point of view.
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Last time I moved home I paid my lender a mortgage arrangement fee of £1000 and a solicitor thousands of pounds to hand writ onto an pre formatted contract of sale. Plus stamp duty “this is whats really wrong”
No matter how great job you do for a tenant, too many parallels are draw with the selling market where buyers receive the services of the agent from the pocket of the seller. The buyer employs a third party solicitor and mortgage lender and without argument pay for their service. . In the lettings industry there is no lender or solicitor to act on the tenants behalf and that important work falls upon the lettings agent to provide. It is only fair they should charge for their reasonable time and expenses. Not being able to is tantamount to communism.
So we are left with a Comminist Tory Government, a headless labour party that has no real chance of getting into power for a generation.
affinity groups like NAEA, NALS ARLA have let us all down badly. We join them so they can help be our united voice on these issues.. Instead of creating a useful argument they saws this as an argument for the regulation of agents to fill their much aligned pockets with further subscriptions. This left the door wide open for the lobbist to shout “un fair”
I feel that every agent should leave their group, be it ARLA or NALS They should feel the financial affect of not supporting their members enough. They are all a complete shower.
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ARLA …NALS etc useless when it comes to supporting the industry who fund their existence via membership fees and their other revenue generating services…..where were they when they should have been lobbying the government?…. Where were they when we should be looking at self regulation and forcing out the many rouge agents who continue to thrive doing bad business…….may be we need a Nigel Farage to wake the industry up?
No doubt the many rouge agents out there will be scheming as we speak to maximise their revenues. Ironic that most of them are ARLA or NALS members…..
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Well said, CP. I walked away from ARLA and the NAEA six years ago for this very reason.
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I havent read all the comments so apologise if some one has already mentioned this but seeing as lenders are changing the criteria (thanks bank of england) and rental yields HAVE to be a minimum of 5.5% next year then the loss to landlords will be much greater. I predict a rise upto 10% in rent next year.
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we have just sent the following letter to our customers; we must not let the Government or anyone else for that matter bring us down! Lets work together and find solutions that work for agents, landlords and tenants.
Dear Customer
I’m sure you are all now aware that the Chancellor will ban fees charged to tenants by letting agents. At this stage this is all that we know; we do not have any timescales or details.
At Let Alliance we work exclusively with letting agents; our proposition is designed to serve you, your business and your customers. Over the coming months we will develop our proposition for you to accommodate the new legislation wherever possible.
On 1st November 2012 the Government in Scotland banned letting agents from charging fees to tenants. Let Alliance responded to this legislation and developed our products and service accordingly.
During the coming weeks, your team at Let Alliance will be working with you. We will hold a series of workshops with letting agent business leaders and we will develop our overall proposition to make sure that we help your business sustain and grow your profitability. This is now our number 1 priority.
We are innovative, we have lots of ideas and we have access to more than 1,000 letting agent business owners. We are also letting agents ourselves. Together we will respond to the new legislation; we will put our customers first and help you to put your landlords and tenants first. To do this we must remain profitable and grow our businesses. Personally, I love nothing more than a serious challenge, and this one certainly falls into that category.
Please feel free to email me or call me with any thoughts and we’ll keep in touch with you as things develop.
Stay positive, keep thinking and working hard.
Best regards
Andy
Andy Halstead
Chief Executive
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Fantastic news.
An end to rip off charges for tenants from an industry that seems to scared make their clients pay for the whole job and instead tries to milk the tenant.
Now perhaps letting agents can start charging the client….that’s the landlord……the person you work for, the one who employs you to do a job and then pays you. Novel concept eh.
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That’s ok we will have the inventory carried out for the landlord to protect his home and no tenant will be gifted that piece of evidence to protect their deposit unless they contribute as it will be paid for and owned by the landlord, you as a tenant will have to instruct your own to protect yourself, then you will have to get your own satisfactory references done and run around for 3 plus working days in order to do so, which could mean you loose out if someone does it faster seeing as we may not be able to take holding deposits to take the property off the market, you may also get guzumped, and even if you do have your own valid referencing as the landlord or agent won’t have chosen the company that supplies them they may reject them in any case because they are unsure of their validaty and want to wait for a 10/10 tenant, there will not be anybody working otuside of your working hours to allow for the tenancy agreement to be signed, keys to be handed over or do that extra viewing for you to measure up and therefor you will need to take more time off work to meet agents opening times, which will become less as they won’t be able to afford the staff, we will not help you set up your utilities or standing order, we will not carry out additional viewings once agreed for you. Rents are likely to go up as landlords now require a minimum of 5.5% rental yield and their agency costs going up means higher rents are required or they will begin to sell their properties as it is now costing them rather than making them any money, so less stock will mean an increase in rents any way. So to stop an average of £202 fees, based on an average tenancy being 28 months,( SO £7.21 a month) you could face a potential rise in rent of 10% over the next year or so, all for less than £10 a month on agency fees. BRAVO BRAVO I wonder how long you will remain smug?
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Love, love this post. Spot on : )
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Wondering how they’ll ever get a previous reference from a letting agent, who’s unlikely to give yet another freebie to a tenant.
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We have always tried to treat both tenant and landlord as our client rather than just the landlord, if you have a happy tenant in essence you should have a happy landlord..
But the whole fee debacle is just beyond me! why haven’t they consulted any of us letting agents and why do they time and time again ignore the likes of us letting agents who were screaming for caps on admin fees and propery regulation.
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Here is what is going to happen, tenants are going to be required to have insurance against dilapidations and arrears. No tenant without a policy in place will be considered for a viewing. It will be their insurers duty to ensure tenants are referenced, legal, and acceptable to the agent and landlord as bona fide tenants.
The insurance will cover the total rent due if the eviction process under section 21 or section 8 is protracted. the Insurance will replace the requirement for a deposit or bond
Tenants who are unable to fulfill these reasonable requirements or obtain insurance due to poor credit history or poor references from previous tenancies can form an orderly line outside No11 Downing Street Westminster.
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I take if from the dislike I just introduce an annual insurance on tenants that will cost a shed load of cash and work against the people who most need help.
Cooper broke a working system Hammond and whoever advised him on this just made those most in need of help homeless!
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Very true, we were batting ideas around the office earlier. We won’t want to be wasting precious time / travelling expense for viewings that won’t be able to proceed.
So no longer will we work with those tenants who won’t meet our reference agencies income criteria. So all low earners, all benefit top ups, most hard working single parents. Sorry your out!
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