So Labour would ban tenant fees.
MartinCo Group currently manages over 42,000 properties through its five franchise brands. You would have thought we would have been one of the most vocal opponents, but we have kept quiet. Why so?
Firstly as a public company, we serve the whole community and do not take a partisan political stance.
We would work with whoever forms the next Government after the election – so harshly critical language is not the best starting point, even if you feel provoked!
Secondly, the influence of letting agents on the outcome of the election is negligible, and thirdly, some of the arguments advanced by the industry in favour of the status quo are a bit weak.
We have developed our lettings business models based on charging both landlord and tenants.
Denied charging tenants, we have to pass additional charges on to landlords. Landlords will, in turn, put upward pressure on rents. But if rents are capable of upward revision then why are we not pushing to get higher rents now?
In a mature provincial lettings business around 60% of income is derived from management commission and 40% from other fees including tenant fees.
The average management commission nationally is 9%, which means that in round terms every £1 of rent generated is split 15p into agent’s pockets and 85p into landlord pockets.
So a ban on charging tenant fees, which translates into an increase in rents, will benefit landlords, even if it “hurts” us.
At Martin & Co our average fee to tenants at the start of a tenancy fee is £330 including the VAT. Our tenants are not VAT registered so that’s the cost to their pockets.
It represents just 1.53% of the total rent that they will pay over the lifetime of an average tenancy with us based on our average rent and length of tenancy. That does not feel exploitative.
When I joined Martin & Co 12 years ago the average length of tenancy was around 14 months. It’s now double that.
This reflects a tectonic shift in tenure patterns, with private renting overtaking the social housing sector in 2013.
Private renting is no longer a lifestyle choice, or a temporary blip between leaving college and buying your first home. Increasingly, we house the nation, and with over a million new tenancies being granted every year, renting a property will be the only property transaction many people will have had experience of.
It’s irrelevant to argue because that the TPO receives so few complaints about tenant fees it’s not a problem – everyone knows agents charge tenants fees and there is not much you can do about it.
The zeitgeist here is the perception that older richer people with choices are benefiting at the expense of younger poorer people without choices.
With growth in the private rental sector comes social responsibility and we risk alienating a generation of renters if we abuse our position as gatekeepers.
Let’s remember that there is nothing “normal” about 6-month fixed tenancy terms.
They were introduced to redress the balance in favour the landlord at a time when the private rented sector was characterised by artificially controlled “fair rents”, and the range and supply of privately rented accommodation was dismal.
I’m old enough to remember the introduction of the standard 6-month term of an Assured Shorthold Tenancy, but 6-month tenancies are an anachronism. Buy-to-let landlords don’t need the property back for their own occupation.
They would prefer to receive regular rental income over the longer term, just so long as they know they can sell with vacant possession eventually.
Rent increases are in reality constrained by wage inflation, and a landlord is better off with modest annual rent increases in line with RPI than a showdown with a sitting tenant, a void period and subsequent re-letting fees.
Rents in the private sector have been growing at a slower pace than social housing rents and we provide very high quality accommodation, exactly where people need it, without social stigma and without public subsidy.
Our best defence is to accept some of the arguments about caps, limits or codes to prevent price gouging on fees, and work with the new Government on longer tenancy lengths, but in return ask for a commitment to the regulation of landlords and agents.
If we are increasingly the sector being asked to shoulder the housing crisis, then let us explain that we are professional agents.
We should say that we follow codes of conduct, carry the cost of proper insurance, and ensure that laws and regulations are adhered to – and that we need to earn a decent living.
Comments (11)
In Scotland fees to tenants in connection with the granting of a lease have been illegal since 2012. A survey in 2014 found only 19% of agents raised rents as a direct result and 9% are charging for some additional fees. Landlords have taken the brunt of this change with 66% now being charged for fees previously charged to tenants. Inventory fees were shared 50/50, but now the landlord picks up 100% of the fee. So it is only a matter of time before this practice rolls south of the border!
It isn’t just the initial fees. Most letting agents in our town tell a landlord not to sign a tenancy agent for more than 6 months to start with, in case “a rogue tenant slips through the net”.
At the end of 6 six months, they then charge a fee to renew the agreement. Generally, they charge both landlord and tenant. Most don’t even reference and credit check again, running the risk of giving a new agreement to someone who has just been made redundant or bankrupt. It may be, however, that the second agreement is for a year. We don’t often hear of longer ones.
If a tenant refuses to sign the new one, we hear all the time of them being served a Section 21 and the landlord being told that the tenant has handed his notice in.
The agent then gets a further marketing fee and a new application fee from a new tenant.
The law is clear and a tenant may legally live in a property on a periodic basis and we advocate this. It’s free, takes no effort and provides both parties with flexibility if they so desire.
If either party wishes to have a new agreement, in order for security or for another reason, we put it to the other party and if there is agreement, we charge a nominal sum to cover references and credit-checking and the drawing up of a new agreement. But, we only charge whichever party instigated the new agreement.
It is also very common practice in our town for an agent to keep every single penny of an application fee or holding deposit when things go wrong, no matter the reason, the time that the application has been in process or the amount of work that has been carried out.
There absolutely are rogue agents operating in every town, but I expect that there are others who operate in a similar manner to us and are reasonable to both parties.
I’m not convinced that the removal of fees will have the desired effect; the costs will be passed to the landlord, some will quit and those who don’t will pass the costs on through higher rents which will mean the applicant pays the “rip-off fees” over and over and over again.
With the best will in the world, however, this will come about. It’s right and proper to charge a tenant for performing a task specifically for him, but let’s be honest about it, virtually everything is done for the benefit of the landlord and it is the landlord who should, therefore, pay our wages.
Herewith M&co’s fees. Isnt this part of the problem???
Each local office will provide a bespoke written quotation of any tenant fees payable depending on individual circumstances and the particular property. The fees quoted below include VAT at the prevailing rate. When applying for a property, the local office may charge a credit referencing fee between £0 to £95 per applicant for taking up references and credit scoring, should the landlord of the specific property require these services. If your application is rejected, or if you withdraw your application, or if you fail to take action to progress your application within seven days of having been requested to do so, you will not be entitled to a refund of any credit or referencing fee. The local office may charge an administration fee between £0 to £350, depending on the specific property and the number of applicants. If your application is rejected, or if you withdraw your application, or if you fail to take action to progress your application within seven days of having been requested to do so, you will not be entitled to a refund of any administration fee. The local office may charge a fee between £0 to £60 per tenancy for drawing up the tenancy agreement. This fee will depend on the type of tenancy and whether the landlord of the specific property requires this service. This fee will only be charged when you are ready to sign the tenancy agreement. In some instances it may be necessary to provide a guarantor who underwrites the financial commitments associated with the tenancy. If you require a guarantor, the local office may charge a fee between £0 to £90 per guarantor. This is dependent on the applicant’s individual circumstances. In advance of a tenancy commencing, some local offices may ask you to pay a holding fee, which will be equivalent to no more than one month’s rent. This is taken to demonstrate your commitment to take the property, subject to contract and references. If you withdraw your application, or if you fail to take action to progress your application within seven days of having been requested to do so, then the local office may retain between 0 to 100% of this holding fee. However, if you proceed with the tenancy, this holding fee will be shown as a credit to your account and will be off set against the total cost of renting the property. Prior to moving into a property you will be asked to pay the rent, deposit and the balance of any fees in cleared funds. The local office can provide you with details of all their accepted payment methods, however some payment methods may carry a cost, which can range from 0 to 3% of the transaction value. If you intend to have a pet residing at the property and the landlord has granted written permission, the local office may charge a fee from £0 to £150 per animal, and may also require a higher deposit. The cost will depend on the size of the property, the level of furnishings, the type of pet and whether the landlord requires a pet clean at the end of the tenancy. When you move into your rented property you may be provided with an Inventory and Schedule of Condition, in order to document the condition of the property at the start of the tenancy. As part of our commitment to fair deposit adjudication, the local office may charge a check in fee between £0 to £190 and a check out fee between £0 to £190, in order to give you the opportunity to make comment on the document. The cost will depend on the size of the property, the level of furnishing and whether the landlord of the specific property requires this service. Some tenancies may be granted for a fixed term. Once this fixed term expires you may be invited to renew the tenancy for a further fixed term and the local office may charge a tenancy renewal fee between £0 to £150. This fee is to cover the cost of creating and executing the legal documents and may be charged every time that you renew your tenancy.
As a Martin & Co franchisee I agree that this is hideously wordy.
The difficulty comes with covering all bases when no two Martin & Co offices have the same fee structure (for an explanation of why see my reply to Fred Jones above).
Its rather like Ford having to set out every possible price you might have to pay for every possible combination of model and trim level at every dealership.
I reiterate though that it is hideously wordy and hope some way can be found to improve it.
These are just the kind of ridiculously unfair fees that should be banned and give us agents a bad name. Thank you M & Co for ruining it for us all – if Labour get in.
I wish Ian Wilson was running for Prime Minister. He talks more sense than all the politicians put together.
Point 1, £330 is an average charge for tenants at martin & Co, do you not have a set fee. So what is the low and how high is the high, any wonder the government is calling for the scrapping of charges?
Point 2, if you must wait a minimum of 1 month to evict on a 6 month tenancy and wait a minimum of 6 months on a 12 month tenancy, how long would you have to wait on a 3 year tenancy?
with some tenants screwing landlord over as a profession, the would be a landlords nightmare.
Re Point 1: Martin & Co doesn’t have a set fee because it is a franchise brand and each office sets its own fee according to local market conditions.
There is no “high” or “low” fee. I’m a Martin & Co franchisee (guess which one . . .). I have a standard application fee but I will occasionally make a business decision to offer a heavily discounted or even free application fee on a particular property if I know the management fees I get from the landlord are especially lucrative.
A good analogy is to compare it to franchised car dealerships – there is no “set price” for a Ford Focus at a Ford dealership, nor is there a “high” or “low” price.
Good article – one comment “Our best defence is to accept some of the arguments about caps, limits or codes to prevent price gouging on fees” – I absolutely agree that we should engage with Government, however on this issue it’s a moot point as the abolition of tenant fees is a manifesto pledge and there is no room for negotiation. I wish it were otherwise.
Let’s not beat about the bush: Compulsory 3 year tenancies would be an opportunity for letting agents to secure 3 year worth of commission in one go.
Likewise, I’m sure that large agents would welcome more regulation as an additional barrier to entry for newcomers, and an extra incentive for landlords to let “the pros” handle their properties.
However, none of the proposals re. tenancy duration, rent cap, or extra regulation would benefit landlords. In fact, as they would depress supply further they would not even benefit tenants seeking a place to live.
Landlords could be agreeable to longer fixed term tenancies if eviction for e.g. rent arrears was actually guaranteed and fast… Not holding my breath.
Not quite sure how Mr Wilson made it to the top of Martin and Co but perhaps this is explained by him turning 9% in to 15 pence in the pound!
If that cretin Milliband gets in the rents will simply rise to take the tenancy fees into account.