Letting agent fees to be transferred from tenants to landlords

Ryan Bembridge

November 23, 2016

Letting agency fees will be banned for tenants and landlords will instead have to foot the bill, Chancellor Philip Hammond is expected to announce today.

In today’s Autumn Statement Hammond will reportedly claim that shifting the cost to landlords will save 4.3 million households hundreds of pounds.

As it stands tenants can be charged fees for a range of administration including reference, credit and immigration checks.

Scotland has already banned lettings agency fees.

David Cox, managing director of the Association of Residential Letting Agents, reckons the ban is a “draconian measure” that will have a negative impact on the rental market.

He said: “It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder.

“This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account.

“If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents.

“The banning of fees will end up hurting the most, the very people the government intends on helping the most.”

But Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, thinks it’s a good move.

He said: “What will be banned is agents putting out the same charges to both landlords and tenants which is profiteering.

“If I was a landlord I would expect an agent to work solely for me. They are creating a conflict of interest by charging the tenant money.

“I think it’s highly sensible though some of my members may not agree with me.”

Bob Young, chief executive of buy-to-let lender Fleet Mortgages, agrees with Sinclair and doesn’t think the changes will result in higher rents.

He said: “It seems that some letting agencies charge what they can get away with which must put off some people from renting and that can’t be good.

“Letting agents can also be conflicted as they charge both the landlord and the tenant; not many firms have this as a business model.”

He added: “I’m not completely convinced these measures will result in an increase in rents as typically landlords charge what the market will take and that may not allow an increase.

“Overall the private rental sector has good landlords, good tenants and good letting agents.

“Unfortunately it also has poor landlords, poor tenants and poor letting agents and these latter elements need to be dealt with.”

Betsy Dillner, director of tenant charity Generation Rent, calls it “fantastic news”.

She said: “Tenants are a captive market for letting agents who can charge fees that bear no relation to the true cost of their service.

“Some agents are getting away with charging a couple more than £700 at the start of a tenancy.

“These costs are making it impossible for some tenants to move out of unsuitable homes. By removing this market barrier, the government will force negligent landlords to up their game.

“The letting agent’s costs should be paid by their customer anyway – the landlord. With more choice over who they use than tenants have, landlords would be more able to force down excessive costs.”

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