Peers have come a step closer to getting lettings agent fees in England banned.
A controversial Private Member’s Bill, introduced in the House of Lords by Baroness Grender, to effectively ban lettings agent fees passed through the committee stage last week.
The Renters’ Rights Bill seeks to amend the Landlord and Tenant Act 1985 by stopping letting agents from charging tenants or prospective tenants: registration fees; admin fees; inventory check fees; reference check fees; renewal fees; and exit fees.
However, trade body the National Approved Lettings Scheme is relying on a minor amendment that could preserve some charges.
The Bill says: “A letting agent who, in connection with the grant, renewal or continuance of a residential tenancy, requires from the tenant the payment of any premium shall be guilty of an offence under this section.”
This doesn’t include taking rent or deposit, but a further clause, NALS believes, allows some leeway, stating: “The Secretary of State may by regulations specify the categories of sum which are not to be treated as a premium for the purposes of this section; and the maximum amount which tenants may be asked to pay in respect of such a sum.”
Speaking to Peers during the debate, Baroness Grender didn’t seem to think this amendment would be used by the Government.
Isobel Thomson, chief executive of NALS, said: “This amendment is a welcome one. NALS has long campaigned to raise the issue of upfront fees and what is fair for both tenants and agents. We believe that industry itself can offer credible alternatives to the complex issue.
The Fair Fees Forum – drawn together by NALS – seeks to find common ground between responsible, professional agents and tenant focussed groups over the range of fees that agents should be allowed to charge in return for the significant work they do, often behind the scenes.
“Baroness Grender is aware of the Forum and has asked to be kept involved in its work. The Forum looks forward to helping inform Government’s thinking on what can be charged for and at what level.”
The legislation still needs to get through report stage and have a Third Reading before it is then looked at by MPs.
The Bill also backs mandatory electrical checks and a database of rogue landlords.
How do they expect smaller agencies to survive if we can’t charge “reasonable” fees to cover our overheads? That along with the new tax rules and stamp duty being extortionate for buy to let, they are on a collision course to put more pressure on local authorities and the courts as landlords start to sell up and issue possession notices.
Anyone want to buy an agency?? What a farce!!
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Having already started to prepare for this via landlord conversation’s of increased fees their end, the replies have all been the same; cover these costs by increasing the rent.
Tenant pays in the end…..
So the following legislation could well be rent caps? This will lead to private landlords leaving the market and a reduced supply, which in turn will lead to increased rents.
Tenant pays in the end…..
Fair fees, regulation on CMP, regulatory body membership….one legislation encompassing all of these would be welcomed by nearly everyone in our industry. There has far too much rushed, populist and ill thought out legislation over the last few years.
Can we please slow down, get in right…and do it just once.
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I fail to understand why they don’t regulate the industry properly. Sadly they seem intent on destroying it.
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Where is ARLA when you need them?
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Collecting their subscriptions from you.
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If landlords are to take greater risks by not being able to charge for referencing for example they will be seeking ONLY ROCK SOLID TENANTS who can amply prove their status. This again is going to leave the riskier or even slightly riskier tenants out in the cold – literally!
The constant regulation by legislation is driving up rents and limiting markets. It will reduce rental housing supply unless rents increase to compensate. They will eventually slaughter the cash cow they have been exploiting.
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About time too.
My daughters just been charged £120 to renew for another 6 months which involved printing off a contract for her to sign.
She was also charged £99 for the original credit check, which actually costs about £30.
The admin charge was £350. If she’d been taking the flat on her own it would have been £225. £125 for an extra name on the contract. It must be super, special ink.
Take the p*%s, take the consequences. Have a good day.
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where do you think the money comes from to pay office rental space, lighting, heating, many different insurances, wages, water, business taxes……the list goes on! you are either very or naive or expect life to be free! for everyone. all that will happen is rents will increase meaning your daughter pays more in the end per month!
the government need to really sit down and think seriously about their proposed plans because all that will happen is prices will increase in an already inflated rental market making more and more people unable to afford to rent a property… so more and more subsidies given to help towards rent payments coming from the tax payer!!
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The point, that none of the estate agents seem to be getting here, is that if you need to charge the tenant a bunch of fees, in addition to the commission you’re already getting for letting the property, then your business is based on rent-seeking behaviour.
The fundamental problem is that a number of charges have been created to pay for costs that only arise because of the increasing costs incurred by lettings agencies. Remove the middlemen or slim down the herd by legislating this behaviour away, and suddenly nobody has to come up with £750 extra per property just to run a business.
If an estate agency cannot make a profit by taking a percentage of the rental yield or sale price of a property, they’re not running an efficient business.
If there is not enough rental/sales business to go around, then some estate agencies need to go out of business or merge with other outfits to stay competitive. That is the nature of the free market.
The point is that the rental agency model has expanded and expanded, and when there isn’t enough commission to go around then agencies start to introduce fees on renters – essentially directly taxing renters and distributing this wealth to estate agents.
Who frankly, only serve any purpose at all because there are so many estate agents, and not enough tenant protection to make it safe and easy for renters to rent directly from landlords.
If your estate agency needs these extra fees, then your business costs are too high for the service you provide and you’re engaging in needless rent-seeking. If you can’t make it work based on commissions from rental yields or sales, you’re just bad at this and deserve to go out of business.
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Do you understand how business works? A business has to make money otherwise it can’t survive. As others have eluded to, the costs will ultimately be paid by the tenant somewhere along the line, and this will be in the way of increased rent, so they still lose out.
I agree that some do take the p*%s as you so eloquently put it, but do you not agree that it seems crazy to punish everyone (especially when it is ultimately the tenant that is going to be punished by way of less supply and higher rents) because of a few?
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I presume you do not work and get paid a salary. If you do where does your employer get the money to pay you? Your argument is over the level of fees? and should be put into context of overheads before profit. Yes there are agents who take advantage on fee’s but not all and there has to be fees .. nothing is free.
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I hope your daughter doesn’t work in the sector, because I am getting information from agents across the country that in the next few months after this is introduced, there is a very real risk that some redundancies will be inevitable…How will those people who rent and work in the sector pay their rent then?
Far reaching consequences created by a government who hasn’t listened to the industry, well done!!
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Yes I do know business. I run a branch (sales only) in South London. I also worked for LSL for 6 years and had a letting department in my branch….so I know business and I know letting.
Seller wants to sell a house…do we charge the buyer for printing off the sales memos, do we charge them for the viewing, do we charge them for price renegotiations, accompanying surveyor or T&D specialists, Do we charge the buyer for anything.
This is how it should work. Landlord wants us to rent out his flat, he pays us. Maybe a finders fee, maybe the ongoing income from full management. The landlord chaps….he’s asked us to do a job and he should stump up. The tenant should maybe pay for the credit check but that’s it. They shouldn’t have to pay a penny more. If you have to look to the tenant to milk every last drop from your failing business model you’re doing something wrong.
Because unjust and unnecessary fees create jobs doesn’t mean they’re right.
Other than income for your office….justify tenants fees. You can’t. I applaud the government on what we’re likely to hear today. Whoop.
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Don’t you think there is a salary to be paid for some one to do that role? Or do you think people work for free? Your daughter now being in the rental market will find it harder to save for a deposit to buy and susequently when this goes ahead/if this goes ahead then her rent will increase to cover those costs, which means longer in the rental market and probably if her salary doesn;t change her property will become smaller and smaller as cost rise and her salary no longer covers the rent. NOT all agents take the **** and now because of all this alot of people are going to get hurt in the pocket
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We have recently had three different sets of tenants pull out of taking properties at the last moment, one who refused to take the property at the handover because she objected to the kitchen light fitting even though it was there when she viewed the property!
All had been referenced and tenancy agreements etc. had been prepared. At least we were able retain their fees to cover some of the costs of the work carried out but not in the future should the proposed legislation be successful.
As I have previously stated on this forum, Building Societies and other lenders can charge what they like as administration fees for obtaining a mortgage and no-one seems to be concerned.
Fees should reflect the cost of the work involved in referencing a tenant but to not be able to charge anything at all is totally unfair.
We have a cost which if not recovered from the tenant will have to be recovered from the landlord who will require a corresponding increase in the rent so tenants will pay in the end and long term inevitably a great deal more than a one off fee at the start of their tenancy the longer they stay in the property.
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The basic issue here is that charges have to cover costs which include a reasonable profit margin for the risk taking business owner. Otherwise why else would they be in business?
One side of the argument might say that operating costs and therefore charges to the customer are kept artificially high because there are too many letting agent players sharing the market; a duplication of premises costs, staff, cars, utilities, insurances, marketing….the list goes on. Less agents in any given market would mean less duplication, better economies of scale for those remaining and either a) lower consumer pricing whilst maintaining profit levels or b) more profit for those remaining if pricing were not to change.
On the flip side, competition in the market will eventually prevail. Those agents offering a lower cost, efficient, full service business offering with scale will gain traction in a given market place and the smaller more costly services will probably lose out.
Has FromTheHip64 considered the alternative to renting – i.e. the costs of buying; £2000 mortgage arrangement fee, £650 survey fee, search fees, solicitors fees, stamp duty etc? In the short to medium term renting is probably cheaper and far more flexible.
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So lets see what happens if this gets through parliament;
Tenant Fees are banned = Higher fees for landlords from agents to re-coup their lost income
Higher fees for landlords = Higher rents for tenants as landlords pass on their higher costs
In addition landlords start to sell as BTL becomes less economically viable with higher costs and unfavorable tax changes. Which then adds to the shortage of rental stock and drives rents up further.
Congratulations, a well thought out plan to save tenants money.
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Looney politics all that will happen is tenants rents will go up and this leads onto rent capping which is in Corbyn’s suitcase. Whatever happen to the statement “free market”. If tenants are not prepared to pay the fee go to an agent who doesn’t over charge and likewise for the landlord.
This kind of attitude is exactly why so many people are fed up with the political establishment = private members bill were not elected by the country and should be outlawed. It is a gross misuse of position and not representative.
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You may wish to contact the Baroness directly to share your thoughts;
Email:
grenderr@parliament.uk
Address:
House of Lords
London SW1A 0PW
Twitter:
@OllyGrender
Telephone:
020 7219 3000
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You only have to look at Scotland where research after the banning of fees revealed an increase in rent which, over the course of a year/tenancy, was substantially higher than the ‘saved’ fees (I seem to remember it worked out around double). What is more, the increased rent continues indefinitely whereas fees are few and far between on a renewing tenancy.
The biggest issue is that this is viewed on a nationwide scale which is madness. Here in London we are very lucky with the fees we earn from our clients (our average fee for a let only service is around £2,000) so we can afford to undertake elements of work at our clients expense. But, if we were getting a months rent as a fee in a region like Wales or Northern England that fee could easily be around £400. I know we certainly couldnt function at that fee level- especially if additional fees were blocked.
Yet again, another knee-jerk reaction from the government listening to Tenant woes (which they should) but then ploughing ahead without any proper industry consultation.
You have to ask serious questions about what ARLA & RICS are doing to represent what will be a very serious issue for letting agents across the country. Well done NALS for at least being actively involved.
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London is its own market. It cannot be compared to other markets.
I would say in an incredibly competitive area where i am the average for fees (totaled from tenant and landlord) is around 50% of 1 months rent.
To put that into perspective on a £900 pcm property the agent will receive £450 in fees and they will pay for all the extras like inventories, lease preparation, etc.
How can this be excessive to the likes of shelter or generation rent?
Problem is the government are listening to the likes of “Londoners” and thinking this is a nationwide problem. Its not.
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FYI
They will not ban fees, they will put a cap on fees. this will be London centric.
This will effectively raise fees throughout England. Similar as what happend to university fees. Even the worse university’s charge the maximum amount.
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