NEWSFLASH: Government finally unveils lettings fee ban consultation

| Marc Shoffman

The Government’s long awaited consultation on banning tenant fees has finally been published this morning.

The proposals, first touted in Chancellor Philip Hammond’s Autumn Statement five months ago in November, outline the controversial measures stopping lettings agents charging fees to tenants.

The document shows that the Government intends to legislate that no agent will be able to charge tenants any fees, premiums or charges that meet the general definition of facilitating the granting, renewal or continuance of a tenancy.

The ban would also include any letting fees charged to tenants by landlords and any other third parties to ensure that letting agent fees are not paid by tenants through other routes. Tenants should only be required to pay their rent and a refundable deposit, the document says.

There are some exemptions proposed, such as holding deposits to take a property off the market while reference checks are undertaken, and in-tenancy property management service charges arising because of the action of the tenant such as replacement keys or for deliberate damage.

The consultation recognises lettings agents should still be reimbursed for their work but claims in many cases they have already been charging landlords.

The document recognises rents may rise if increased costs are passed on to landlords.

It said: “We would not expect the full level of tenant fees that are charged currently by letting agents to be passed on to landlords since there is evidence that a number of agents are charging excessive fees and that some agents are double charging landlords and tenants.

“Under the ban, all agents will need to be efficient and fair with their fees in order to secure landlords’ business and therefore the fees charged should be a fair reflection of the services provided.

“Like any other supplier, landlords will need to set a rent that takes into account their costs whilst still being attractive to prospective tenants. Some landlords may absorb some or all of the increased fees charged, however others may choose to reflect the increase in the headline price for the property.”

The Government claims the changes mean tenants will be able to compare properties based on rental level rather than other fees.

Once introduced, the ban would be enforced by local authorities, primarily Trading Standards, according to the consultation, with civil penalties of up to £5,000, industry bans or criminal prosecutions all possible.

But the Government is also considering the introduction of a lead enforcement authority, similar to that in place in the estate agent sector as well as further regulation.

As if the fee ban wasn’t enough upheaval, the consultation also shows the Government is considering different ways for deposits to be paid.

The document said: “Deposit levels have been increasing and the Government is keen to examine the option of capping the amount of deposit that can be requested by the landlord.

“However, even with a capped deposit level, affordability pressures will remain and in the longer term the Government is seeking to explore the potential and implications of wider options to minimise the financial burden on tenants.

“Not all landlords currently take deposits and we are keen to understand what alternative models there are to remove the need or reduce the scale of a deposit at the outset of a tenancy, and what role the Government might be able to play in supporting and facilitating the growth and development of such models to increase choice in the marketplace.”

One suggestion in the document is for tenants to pay their deposit in instalments over the first few months of the tenancy or using a line of credit approach where an agreed deposit amount is blocked on a tenant’s credit card.

Watch our 60 second guide to the consultation

Housing minister Gavin Barwell said: “We’re determined to make all types of housing more affordable and secure for ordinary working people.

“Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.

“Our housing white paper sets out other ways we will help those renting, including building more homes for rent and providing longer, family friendly tenancies.”

The consultation applies only to England and lasts eight weeks.

David Cox, chief executive, ARLA Propertymark, has labelled today’s proposals as shambolic.

He said: “The Government’s housing policy is shambolic and today’s consultation contradicts its already stated aim to encourage longer term tenancies. Independent analysis launched at ARLA Propertymark’s annual conference last week revealed that if an outright ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.

“The decision is a short-term crowd pleaser and we are disappointed the Department for Communities and Local Government has not considered our proposals in today’s consultation.

“We urge the Government to use this process to think again to ensure that consumers, and the wider economy are not penalised by contradictory Government policies.”

The Government is running workshops to discuss the consultation and the ban in London, Manchester, Bristol and Birmingham.

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48 Comments

  1. mrharvey
    April 7, 2017 at 09:45

    “Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.”
    Yeah… and private business owners have a responsibility to those tenants to operate at a loss?
    This ban stinks and goes way too far – a fee cap would have been plenty, and everyone would have been a winner.

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    1. lettingagent_one08
      April 8, 2017 at 09:01

      This is perhaps perfect timing to illustrative how there is no rational justification for banning fees when one considers this week’s Supreme court judgement on the issue of taking children out of school in term time. The Government, no doubt feeling pleased with themselves over their ‘win’ commented on the issue of travel companies hiking holiday prices during holidays by 50 – 60% by saying ”in a competitive market, it is for the business to decide the market worth of their products and to price accordingly’ Really? Unless that is, you happen to be a Letting Agent. I wonder whether tenants would rather save £1000 on their annual holiday or an £180 admin fee every 3 years?

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  2. NickTurner
    April 7, 2017 at 10:00

    There may be hope. I note the reported comment from the Government Housing Minister is that ”Tenants.should…….  not face hidden fees. 

    So as long as the agents referencing fees are published no problem?

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  3. Maxwell73
    April 7, 2017 at 10:05

    Just copying and pasting from one of my previous posts:
    I find it interesting that agents are calling for fees to be capped. If the initial announcement from the chancellor had been a cap, I suspect there would’ve been a big fuss just the same.
    I also find it amusing how just about every agent seems to claim that their fees are reasonable and that it’s only those ‘rogue’ agents out there who are ripping off tenants. I guess it is unrealistic to think anyone would hold their hands up and admit to being part of the problem.
    Lastly, rental prices will not shoot up after fees are banned. Agents and landlords have already been pushing prices to the limit by trying to get as much as they can out of tenants. If there were an opportunity to increase rental prices – as there has been in the past few years – it would have been taken already, which it has.
    What will happen, however, is that a lot of agents will begin to find loopholes and ‘grey areas’ – some legitimate, some not – to charge extra and recover losses.

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    1. Mark Walker
      April 7, 2017 at 10:21

      Will you pay the landlord’s costs and lost rent when you agree to take a letting, get checked out and then back out just before signing the tenancy agreement?

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    2. aSalesAgent
      April 7, 2017 at 15:39

      “If there were an opportunity to increase rental prices – as there has been in the past few years – it would have been taken already.”
      If prospective tenants had cash to pay upfront fees for admin, referencing, etc, then they can use that money to pay an extra £80+ pcm – that’s what I expect landlords and letting agents will be thinking.

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      1. Maxwell73
        April 10, 2017 at 12:51

        Yes, but my point is that lettings agents and landlords today already try to achieve the absolute maximum in rent – and fees are never taken into account. If agents find that their market allows them to raise rents by, say, £80 pcm, they will do it, even whilst charging fees. Rent price is driven by supply and demand, regardless of fees. No one calculates tenants’ affordability by adding up rent and fees over the full duration of a TA.

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  4. Mark Walker
    April 7, 2017 at 10:19

    I don’t get it.

    ‘no agent will be able to charge tenants any fees’

    ‘Tenants should only be required to pay their rent and a refundable deposit, the document says’

    ‘The consultation recognises lettings agents should still be reimbursed for their work’

    Nice joined up thinking.

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  5. LettingaPropertycom
    April 7, 2017 at 10:22

    Go to https://www.surveymonkey.co.uk/r/dclglet  to provide views during consultation.

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    1. dave_d
      April 7, 2017 at 10:24

      Is this recognised by Parliament?

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      1. LettingaPropertycom
        April 7, 2017 at 10:29

        Yes, it is the link within the DCLG’s Consultation PDF. 

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    2. jeremy1960
      April 7, 2017 at 19:32

      I’ve completed the consultation, it’s very biased towards how to deal with the ban but it is important that not only “Eye” readers complete it but that we get all agents to complete

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  6. dave_d
    April 7, 2017 at 10:23

    How can a fee be classed as “hidden” if they have to pay it to secure the property?

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  7. KByfield04
    April 7, 2017 at 10:23

    Whilst this sheds some light, the language used still leaves lots of questions. It refers to ‘hidden fees’- so does this just mean fees, contained in the tenancy agreement, that are currently not disclosed such as renewal fees or ‘end of tenancy’ fees at the start? What is more, how will this apply to Inventory fees? We currently mandate that this is split 50/50 between tenants and landlords mainly to ensure there is no associated bias in the reports produced. As an industry, however, we only have ourselves to blame for the greed of the few damaging the pockets of the many. Those agents, however, have a tough time ahead with substantial revenue lost in a challenging marketplace- maybe they will end up paying the ulitiame price for their actions to date.

    What is also interesting is, for a government that refuses to properly license and regulate our industry they are keen to roll out more and more laws and reguations. This is great but, as has already been proven umpteen times to date, this is only effective if enforced. As always, the legitimate agents and businesses will adopt the newly mandated procedures but te rogue elements, who the legislation is intended for, will continue to slip thorugh the cracks until active, rather than responsive, legislation is put in place.

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  8. Mark Walker
    April 7, 2017 at 10:33

    Are we going to initiate tenancy agreements ‘subject to passing the credit check’ in order to avoid frustrated costs / lost rent for the landlord?

    i.e. All prospective tenants have to sign up to the tenancy immediately, even those looking at the same property, before the Landlord or agent lifts a finger, with a one-sided in the Landlord’s favour clause which brings the tenancy in to effect to the first party that passes all the necessary checks.

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    1. dave_d
      April 7, 2017 at 10:37

      No Mark, that would be against the rules.

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      1. Mark Walker
        April 7, 2017 at 10:59

        It seems that rules can be changed.

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  9. Giarc29
    April 7, 2017 at 10:42

    First months rent is increased to reflect lost fees thereafter the monthly rent is the same. Simple !

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    1. mrharvey
      April 7, 2017 at 11:30

      erm….no

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      1. newcastleagent03
        April 7, 2017 at 11:33

        how come no?

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        1. Maxwell73
          April 7, 2017 at 12:03

          Perfect example of what I mentioned in my comment above about how agents will be looking for loopholes and ‘grey areas’ in order to charge tenants – which makes everything even less transparent.

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          1. aSalesAgent
            April 7, 2017 at 15:45

            Mortgages have an ‘inital rate’ before they switch to the lender’s SVR (which is subject to change during the term of the mortgage) after, typically, 2 years. Very confusing, but it’s all in the KFI. Maybe that’s an angle letting agents will take too…? *shrug*

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        2. mrharvey
          April 7, 2017 at 14:11

          I can’t see any tenants willing to go with an arrangement that clearly goes to pay for their fees. Any agent that does that will soon find themselves reported for being shady (whether legal or not). Better to increase EVERY month, by a lesser amount, and cover costs over the length of a tenancy. The issue of cashflow then arises but I can’t speak on behalf of any agents there.

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  10. Votta583
    April 7, 2017 at 10:49

    Hidden fees???????

    IF the government actually ENFORCED consumer protection regulations and displaying of fees  there would be no hidden fees!!!

    Enforcement of regulations is the answer to all of this!!!

    Instead of calling it a tenant fee ban why don’t they call it “destroying the private sector project”

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  11. new life
    April 7, 2017 at 11:07

    As an agent of some 25 years fees have always been given to tenants in advance of a rent and at times have been negotiated, buisnesses are there to make a profit we are none of us charities although the government and the protesters would like to think we are.

    Are the government going to be looking at the banks next ??? interest at its lowest rate in decades yet credit card  and loan interest is at an all time high PROFITEERING i hear you cry how dare they yet as a industry we are being lambasted for charging for a service we provide and on the whole very well.

    The ban will only serve to punish the very people who they are trying to help as they say be carefull WHAT YOU WISH FOR!!!!!

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  12. newcastleagent03
    April 7, 2017 at 11:18

    yes giarc, surely agents will increase 1st month rent alone, no mention of fees, what do others think?

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    1. Ding Dong
      April 7, 2017 at 11:33

      if it looks like a duck, floats like a duck and quacks like a duck ………..
      let me know how you get on in court?

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      1. newcastleagent03
        April 7, 2017 at 11:34

        There would be no mention of any fees, its simply 1st months rent, the government have said nothing but rent and deposit can be charged?

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        1. Ding Dong
          April 7, 2017 at 11:51

          its not rent though, you may call it rent, but i would argue is it a hidden fee….
          hence my referecne to awaiting a court decision 

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          1. newcastleagent03
            April 7, 2017 at 12:32

            Fair enough, its the 1st months rent, theres no mention of fees, my arguement is that there is no fees mentioned anywhere to tenants, they pay 1st months rent and deposit. Landlord is covering there own let fee

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  13. Ding Dong
    April 7, 2017 at 11:34

    Pretty much the Scottish model being introduced in England….very little wriggle room especially through third parties

    get ready for a total ban and model your business accordingly

    also looks from the consultation that agent licensing will come in at some stage

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  14. new life
    April 7, 2017 at 12:05

    so if third parties cannot make charges either if ive read this right how are prospective tenants going to be referenced and who is going to pay for said references?

    and are agencies going to accept references from companies they do not use or have no knowledge of??

    Inmates are taking over the asylum.

     

     

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    1. Ding Dong
      April 7, 2017 at 12:10

      the landlord pays for the referencing 
      ask the landlord if he wants a referenced tenant or not, and I think I can guess the answer 

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      1. new life
        April 7, 2017 at 12:59

        so were going to have multiple tenants offering on multiple properties without a care, landlords refusing to pay for all the multiple references and tenants just doing as they please, 
         
        Im off to drive busses its going to be like jungle  out there. and were the ones being hunted .

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        1. Ding Dong
          April 7, 2017 at 13:24

          i think a holding fee will be exempted from the ban…just need to make sure as an industry we make that clear in the consultation
          if the landlord does not want to pay for a referenced tenant, then i think that speaks volumes of the type of landlord they will be

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          1. new life
            April 7, 2017 at 13:32

            Couldnt agree more.
             

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            1. BrandNew
              April 7, 2017 at 14:18

              I’m sorry. The reference is for the benefit of the applicant. They need to be able to prove to the Landlord that they are suitable people to occupy his property, look after it and pay rent on time. Why should the Landlord have to pay for multiple references as tenants try to play the system. How is he going to recoup those losses….. by raising the rent.
              Landlords are not a social service.

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              1. aSalesAgent
                April 7, 2017 at 15:57

                When people sign up for a 2 year mobile phone contract they expect to be credit-checked, but they do not pay a seperate, upfront fee for that check – it’s absorbed by the phone company. Just saying…

                P.S. I’ve not taken out a new mobile phone contract for a looooong time, so apologies if I am completely wrong and fees have become payable.

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                1. BrandNew
                  April 7, 2017 at 16:24

                  They don’t ‘absorb’ it, it is built into their charges as a cost of sale.
                  Which is why rents will increase if fees are banned.

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                  1. lettingsguru
                    April 7, 2017 at 17:32

                    Plus if the user of the phone doesn’t pay they get disconnected very quickly – and a phone and contract is significantly less value than a property and associated rent.

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                  2. aSalesAgent
                    April 7, 2017 at 17:39

                    Same-same.
                    And I agree BrandNew – rents will go up.

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  15. Giarc29
    April 7, 2017 at 14:12

    So let’s ban NHS prescription   charges.The government is getting two fees! One from the tax payer and another from the patient !

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  16. NickTurner
    April 7, 2017 at 16:41

    Simple answer may be that once you as the letting agent have decided that a prospective tenant/s is or are , subject to referencing OK,then the prospective tenant/s send the payment direct to the rerencing company recommended by you. If OK proceed,if questioned/doubtful no go and find another tenant. No messing about trying to negotiate.

    Amortise the cost of referencing into the monthly rent i.e. £ referencing cost ./. 6 or 12 months = add per month before advertised inclusive rent  published as another way.

    Any other ideas from anybody as to how to come up with a workeable way forward?

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    1. BrandNew
      April 7, 2017 at 16:48

      Not allowed under the consultation document as the referencing company would be a third party which is also banned.

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  17. BrandNew
    April 7, 2017 at 16:46

    Read through the consultation paper and the ways to respond which just shows the governments disdain for Agents. Two deliberately composed questions in a survey which is ‘the preferred method of response’. I.E. if you respond in any other way it will basically be ignored. Some ‘consultation’. !!!!

    In my view the whole package is based on a false premise and is discriminatory and therefore open to Judicial Review. That is something the regulatory bodies should look at.

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    1. new life
      April 7, 2017 at 17:32

      If only Ideal world all the trade bodies are interested in i there members fees they should be shouting fronm the highest point no fees less agent less agents less subscriptions less subscriptions no ARLA etc  just saying………
       

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  18. agentx
    April 7, 2017 at 17:30

    Whilst we are bashing lettings agents for daring to charge for a service level can we also ban mortgage arrangement fees, holiday booking fees, concert ticket booking fees, restaurant service charges and old people from clocking in at the House of Lords to collect £300 and then fall asleep for the day after an all expenses Tax payers funded gourmet meal.

    Here is the reality – We are closing two prominent High Street offices and making staff redundant to cover some of the potential shortfall. At least the staff we have dumped on the unemployment register can now claim benefits and if they lose their houses can rent on the cheap.

    Tenants? They can phone my office 20 miles away, no more office visits – Welcome to Docusign. No service charge, no service – Phone Shelter, they love to help.

     

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  19. new life
    April 7, 2017 at 17:38

    Sorry to hear about the office closures but very well said you just forgot to mention banks charging 30% on credit cards when the base rate is 0.5 % enough said

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