Gathering storm of fees ban in Scotland – and a warning to English government as Scots landlords ‘flee the market’

Five years after agents’ fees charged to tenants were formally banned by the Scottish government, the effects continue not just to reverberate but to worsen.

The claim comes from Tony Williams, managing director of referencing firm UKtenant data.

He has been researching the Scottish market by engaging directly with letting agents, to see if he can establish any likely pattern for what could happen in England after tenancy fees are banned.

In England, there is still no clear timetable – despite the ban having been announced almost a year ago in the Autumn Statement, when Chancellor Philip Hammond said the change would be “introduced as soon as possible”. The Government has since repeated its pledge to bring in the ban, with a consultation between April and June this year.

A new inquiry into the lettings agent and leasehold sectors was launched last week, but without any obvious sign of immediate legislation.

Williams, who is based in Preston, said at the weekend that the feedback he has had from agents in Scotland is depressing.

Although ‘premiums’ have been illegal in Scotland since 1984, agents continued to charge some fees and the position was legally clarified in November 2012 as a complete ban.

Williams said: “The loss of fees has had a profound effect on the rental sector in Scotland.

“We are all aware of the obvious fall-out in terms of lost jobs, increased rents and so on, but I simply wasn’t prepared for the level of properties that have been withdrawn from agency management and sold due to the increased fees to landlords.”

He cited the example of one agency in Glasgow which he described as having been “absolutely hammered”.

He said: “I had a particularly depressing conversation with a great client of ours, Core Property, based in Glasgow. Core are a truly professional agency who welcome positive change to the industry.

“However, Carol Brown Blair, a senior manager at the company, said the fee ban has had a really negative affect on the industry and the rental market in Scotland. During our conversation Carol told me she had lost in excess of 100 properties in just 12 months due to landlords selling them and exiting the market completely.”

Williams told EYE that the firm had agreed to be named, such is the strength of the agent’s feeling about the effects of the ban and the message it should send to England.

Williams said: “Initially, the ban in Scotland hit agency revenue resulting in increased fees to landlords and rents rising to mitigate some of these costs, but what’s really interesting is what is happening years down the line post-ban.

“It probably started subtly, with just a small proportion of landlords selling up and getting out.

“Now it is as though there is a ‘bang’ and they are clearing out in droves. Can we blame them? No, not really – property investment in Scotland is simply not a viable proposition any more.”

Williams said: “This is an elephant in the room – and there is a message for the English government.

“Don’t take the rental sector back to the 1970s. Acknowledge the facts and have a more balanced and sensible approach to the issue of fees.

“This isn’t just about agent bashing – it’s about an industry that just can’t afford to contract.”

Shelter, which campaigned for the ban in Scotland, did research in 2013 which claimed that only 2% of landlords had raised their rents because of the ban. Last year, in a blog on its website, Shelter said: “Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research shows that this hasn’t been the case.

“The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK.”

Williams called for Shelter to engage with him to discuss why there was such a disparity between its findings and those of his own firm.

Williams’ remarks follow an article written in EYE by his colleague Mitchell Thomson.

Ian Wilson of The Property Franchise Group has said that Martin & Co franchisees in Scotland actually saw their lettings revenues rise in the year after the ban, but did not deny that costs for landlords have risen. Earlier this year, he said that set-up fees charged to landlords doubled from £200 at the start of the ban to £400, and that rents have risen.

Meanwhile, DCLG is insisting that the ban in England will go ahead.

A spokesperson said: “Our Tenants Fee Bill will be first published in draft to ensure full scrutiny of our proposals by Parliament and stakeholders before introducing the legislation formally. We shall publish the outcome of the public consultation on our proposals shortly.”

https://www.propertyindustryeye.com/the-truth-at-last-what-really-happened-in-scotland-after-letting-agent-fees-were-banned/

Why agents should not attempt to circumvent the fees ban

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7 Comments

  1. Peter

    I suspect it is a combination of issues that add up to Landlord and Agent bashing. All this “bashing” seems to do is either discourage landlords from using agents or leave the market altogether, resulting in either lower standards or lower stock.

     

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    1. Neilw

      I agree Peter…. also why would a Landlord take a property back because Agent not getting fees…good luck to Martin & Co with their set up fees at that level……. leaving door open to competitors. In my experience Landlords priorities tend to look at the ongoing cost implications of tax changes, proposed EPC ratings, EIRC, Pat Test, Legionairre Test, Gas Safety, Smoke/heat Alarms and CO Alarm.

      Also many enforced Landlords now selling because market has picked up to allow them to sell and move on with their lives…..add in uncertainty of Brexit and I am sure everyone would agree the Agent losing income is not top of the list for withdrawing. Perhaps a few takeovers/mergers next year when the new stringent Agents Regulations come into force!!

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  2. agent34

    Would I be wrong in suggesting that the greed of London agents with their astronomical application fees has prompted the government to bring in the ban in England where a cap on fees might be a better direction to go or is that another argument

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  3. Barry20

    “Shelter, which campaigned for the ban in Scotland, did research in 2013 which claimed that only 2% of landlords had raised their rents because of the ban.”

     

    Of course, Shelter would claim this. If they agreed with the facts that rents rose by 4.2% then that would scupper their support/lobbying for bringing in a similar ban on letting agents fees in England.

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  4. Property118

    May I suggest the more recent exodus of landlords from the sector has more to to with the restrictions on finance cost relief than the fees ban?

     

    In my opinion, the restrictions on finance cost relief are likely to have a far worse impact on agents due to landlords selling up.

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  5. Deltic2130

    I know a letting agent well who just lost her job at a well-known national chain after 17 years because – as her boss put it – ‘landlords just aren’t coming through the door’. She was one of two in her office alone. What might be the national picture? Many agents now report on the ’empty desk’ syndrome.

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  6. Barry20

    Tenants are facing a perfect “storm” created by this and the previous Government:

    1. freeze on LHA/HB
    2. UC
    3. the PRS being forced to increase rents because of Sec. 24, 3% SDLT surcharge, loss of W&T allowance, Letting Agents Fees ban, Licensing fees, PRA mortgage restriction, Right-to-Rent, Legionnaires checks,
    4. less rental properties available due to Landlords exiting the market due to the reasons in (3.)

    …..and like most severe storms in its wake will be catastrophe, misery, and homelessness.

    This Government has been warned and chooses to ignore the advice/forecasters, it even chooses to ignore the near identical situation and it results in recent years in Ireland.

    SHAME ON THIS GOVERNMENT WHO IS WILFULLY AND KNOWING CREATING A HOUSING CATASTROPHE THAT WILL CAUSE UTTER ABJECT MISERY FOR 10’s OF THOUSANDS OF THE MOST VULNERABLE PEOPLE IN OUR SOCIETY.  AND FOR WHAT?

    SHAME ON “SHELTER”, WHO PROVIDE HOUSING FOR NO-ONE, WHOSE CONTINUED ATTACK ON GOOD LANDLORDS, AND SUPPORT OF GOVERNMENT ANTI-LANDLORD AGENDA WILL EXACERBATE THE PLIGHT OF THE VERY PEOPLE THEY PURPORT TO BE HELPING.

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