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Letting agent fees ban will drive up rents says housing minister

letting agent fees
Sally Walmsley
Written by Sally Walmsley

A ban on letting agent fees paid by tenants will increase market rents – hitting hardest the tenants they are designed to help.

Housing Minister Gavin Barwell MP said in a tweet just weeks ago that a ban was a: “Bad idea – landlords would pass costs on to tenants via rent. We’re looking at other ways to cut upfront costs & raise standards.”

Just last week, the Communities and Local Government Minister, Lord Bourne, also expressed reservations about such a policy warning that “we must be mindful of the potential impact on rents from banning fees paid by tenants.”

Alan Ward, Chairman of the Residential Landlords Association said: “This will not help tenants, especially those that are ‘just managing’.

“Agent fees have to be paid by somebody. If any additional fees are passed on to landlords, tenants will end up paying them forever as market rents will increase.

“It would have been much better for the Government to have taken steps to improve the transparency of fees charged by agents by forcing them to publicise what the fees actually cover.”

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Communications Manager for the RLA and award-winning Editor of RPI magazine. With 16 years’ experience writing for regional and national newspapers and magazines she is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and editorial content for our media partners.

She issues press releases promoting the work of the RLA and its policies and campaigns to the regional and national media and works alongside the marketing team on the association’s social media channels to build support for the RLA and its work.

22 Comments

  • I am landlord and have been tenant in past. Fully support the move. For property sales, seller has always paid the fees and buyers paid nothing. Aligning lettings to sales will help with clarity for tenants – the rent is all inclusive.

    • Absolute nonsense in relation to the sales process. The buyer in most cases pays for the mortgage application, a surveyor, a solicitor, etc. The letting process is now completely one sided. As a landlord you would feel the squeeze if a tenant messed you around after having paid for a reference check or inventory then said its not for me. What if a family does this? Would you like to pay to reference 4 adults when they have no obligation to go ahead?

    • A few more budgets down the line….unfair that JAM buyers have to pay legal fees to own a house sold by a greedy landlord ..they should pick up the bill.

      The government isn’t shy of fleecing the JAMs for stamp duty when they buy… remember that in the 1980s you had to be buying above £60k to incur 1% if my memory serves me well, that must be equivalent to about half a million in today’s market.

      I am not supporting excessive or obscure fees but it is not really about the fees…just more of the same deflection from the government’s own shameful culpability in the dysfunctional housing market we now have.

  • I am an agent who charges £100 application fee per property not per person. My first check is the credit check should this fail tenants can obtain a guarantor should this still fail the receive £70 back as I will not continue with the application. So basically I have earned nothing. Should the application go ahead the i conduct the references and paperwork. All of which is transparent and approved nylon Trading Standards. Many smaller agents like myself will be out of business if this is passed

  • We are landlords endeavouring to provide quality accomodation and a good tenancy experience all-round to our tenants.

    Wit that objective in mind we have progressively taken back first the management and now letting as well from agents. However, we DO levy fees because part of that quality service is transparency as to what all tenant payments are for. We believe that rent should be for the use of the asset, and any additional charge should be for a specific service pre-identified in advance and published which we do on our own website. It makes no sense that through a unitary pcm rent for tenant/s who want say a corporate tenancy or guarantor, break clauses, additional RtoR checks on renewal etc etc to be effectively subsidised by the single UK applicant that pays for the whole twelve months in one go?

    The FSA/FCA pushed for the abolition of commission on the basis that financial advice was never free and that investors should know what they are paying and what for which should lead to better competion (on price or quality); why does it make any sense for tenants to be pushed into opacity??

  • I fully agree with the chancellor on the letting agents fees, they are pernicious, way over the top & letting agents have become a real barrier to many people renting. Personally I’ve only used a letting agent once for my portfolio & never again.
    The argument that rents will increase is an absolute load of tosh, as has been proved in Scotland.

    • It was the excesses of some letting agents that this is against. Referencing and setting up tenancies is a legitimately chargeable service. A cap would have been much better. As things stand we are now going to get timewatsers who can apply to all sorts of properties with no skin in the game at all. There needs to be something that can be taken as a time-waste deposit that can be refunded on successful completion of referencing and signing documents, but that is probably illegal.

  • In my view this is simply another example of wishful thinking from bureaucrats somewhere… Fact is that the law already requires agents to publish their fees but very few do on anything like a “transparent” basis. I have recently stopped using a lettings agent (national chain agents) because their fees were so obscure (And unreasonable). Had anyone thought about how to police the laws when they were introduced we might now be in a better place. As a responsible landlord I do try to seek out the agents that don’t over burden tenants and potential tenants, that’s just good business.

    However, we must also be mindful of the potential tenant that makes multiple applications with no care for the cost they incur on someone else’s bill for checks everywhere.

    Reasonable fees, clearly set out is what we are supposed to have already according to the law, adding more regs will not improve compliance! A few warnings and prosecutions under existing regs will improve transparency, the market will do the rest.

  • I agree with a ban on letting fees. They are a real barrier to people getting into a rented property, especially those who are struggling even to find the money for a deposit. I don’t use a letting agent now, though I did for a while – she didn’t charge fees to tenants, and her landlord fees were very reasonable. When we advertise our properties, we make a specific point of saying no letting fees – and we always get a large number of responses within 48 hours and a good selection of potential tenants to choose from. Weren’t fees illegal back in the 80s? I remember warnings when I was a tenant years ago never to pay a fee to agents. The cost of time spent on viewings and time/money spent on referencing etc is part of the cost of doing business as a landlord. It should be included as part of an agent’s service to landlords, and fees charged to landlords would certainly seem high enough already in most cases to cover that. There are ways for agents to keep costs down – e.g. Ask people if they are applying elsewhere. Some will lie, but others won’t. If you have lots of people interested, organise a viewing session with individual consecutive timed appointments, rather than making separate trips for each viewing. This helps weed out who’s really keen and who isn’t. Find out as much as you can about people, to assess whether they’re likely to be long term tenants – the less turnover you have, the less the letting cost. Though there’s a potential conflict of interest here, in that agents making money out of lettings fees don’t have any great incentive to look for long term tenants. I note the comment above about the ban not pushing rent prices up in Scotland – it would seem the evidence is there that there won’t be a knock on effect.

    • So with your argument are you suggesting that when you come to buy the government should ban fees on solicitors, mortgage application and surveyor? Lettings fees have to shown by law on an agents website, office and property advert – if fees are completely unreasonable you don’t go with that agent.

  • Agents are already supposed to make their fees openly available and clear! Ours are on our office walls, given out to prospective tenants before they apply, published on our website and have a signatory page to show they have been given this information!

    Furthermore, as an independent family run agent like Mrs Sheralyne Stamp above, we don’t charge the earth either. We’re honest, open and reasonable in all our dealings. We do our utmost to split the start-up costs between landlord and tenant to make it affordable but also to cover our costs which are pushed ever higher by the government. We’re regulated by The Property Ombudsman and ARLA, we’re members of the RLA and Client Money Protection, have so many insurances it makes your head spin, are constantly training staff with changes to legislation and all of these have a monetary cost!

    This move will drive agency fees to landlords up and drive landlords away from agents. Which means there will be more scope for rogue landlords and many agents will be pushed out of business, of which many only just survived the recession. Which will completely undermine the raft of legislation to protect tenants.

    A poorly thought-out knee-jerk reaction to a few greedy agents spoiling it for the good ones out there. The better thing to do would be to cap fees, and enforce the need for clarity.

  • We don’t use letting agents but instead do all the work in-house and charge the tenant a one-off fee for admin. It would be interesting to know whether they propose to include these fees.

  • How will landlord’s recoup these costs? Well, it has to be done. So far, I see 2 points to cover.
    Firstly, what if you do the checks and then the prospective tenant backs out? I suggest an ‘easy’ answer is that the security deposit is paid in advance, and held in a deposit scheme (just as it can be now). If the tenant then does not go ahead with the rental, a clear pre-stated fee is deducted from the deposit and the rest returned. The scheme holding the deposit can then act as arbitrators if necessary.
    Secondly, how and when to raise rents to cover the extra costs? It looks as if around £400 will have to be ‘found’ for rental to two tenants. It could be that this extra cost could be charged over the contracted first 6 months, with the tenant knowing how much the rent will fall by after that. Or over 12 months, but then, presumably a 12 month contract would be needed.
    However, these 2 ideas are, obviously, a way of clawing back the up-front costs of tenant-checks etc from the tenant, and perhaps therefore, is now illegal.
    What do you think?

  • The Government seem to think that landlords can just be targeted time after time – first with increased taxes and now with increased costs. Responsible landlords are already working on thin margins given the time and effort that has to go into the role. Either rents will go up or landlords will give up!

  • I agree that some letting agent’s are charging way too much for there admin fees, but instead of hitting landlords again the government should of capped the admin fees. It’s a joke how the government seem to be going after landlords.

  • I personally choose not to use letting agents. I feel that the existing percentage fees charged to landlords should more than cover the administration work associated with new lettings and letting administration. Having used the RLA’s excellent templates and guidance notes I cannot see how it is justifiable to charge tenants hundreds of pounds for a few simple hours paperwork. A recent citizens advice bureau report calculated the average fees at £337. At the national minimum wage this would represent 44 hours or a weeks work ! . It took me about 3 hours the last time I did it .

    Im not a fan of this Government but I cannot see why the RLA should feel it necessary to campaign against this measure. Tenants have no opportunity to combat excessive agents fees and currently Landlords have little incentive to curb letting agents enthusiasm for charging them . If letting agents try to push additional charges onto landlords then at least landlords have the ability to negotiate or shop around for a better priced service.

    • Not every landlord has the time to look for tenants, or may not feel comfortable or confident to search themselves. I agree there are a large percentage of letting agents that are charging way too much but wouldn’t it of been better for the government to cap the fees the letting agent could charge.

  • When a person wants to buy a house with a mortgage , the bank asks the buyer to suffer survey costs and have a solicitor in place to ensure the loan is secure. A landlord is allowing someone to live in his very expensive asset and needs to know whether a potential tenant can afford the rent and see if his asset is secure in the potential tenant’s hand, so checks are necessary. I have refused tenants on the basis that they have failed their credit check, some I have accepted with a guarantor -if you accept a tenant with a guarantor, you also need to check the guarantor, the govt is now saying that a landlord has to pay these tabs?, in addition, what happens if the tenant changes his mind and the landlord has already incurred those costs?, sorry it does not make sense. The landlord already has to pay the Letting agency 3 weeks commission & vat , solely for introducing a tenant , but only if the LA succeeds in introducing a tenant

    • This is the exact point I put across to Beverley. Maybe the Government want to impose bans on all business services. The socialism route is the best way forward they seem to think!

  • Can a private landlord charge for checks? If so could the letting agent simply do the checks ( in the name of the landlord) and let the landlord invoice the tenant?

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