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Letting agent fees set to be banned outright in today’s Autumn Statement
Original Author: Rosalind Renshaw
Today’s Autumn Statement will impose an outright ban on letting agent fees charged to tenants in England.
Crucial details such as the exact timing are yet to be revealed in the Treasury’s small print, but the BBC has confirmed the move – which marks a U-turn for the Government.
Prime minister Theresa May has previously voted against a ban on fees, while housing minister Gavin Barwell has called it a “bad idea”, saying that landlords would simply raise rents. The Government’s line has so far consistently been that it will keep under review the legal requirement for agents to display their fees openly both on their websites and in their offices.
The ban, if confirmed today and barring a last-minute change, is likely to be part of a government White Paper on housing. The concern in the industry will be if the ban does not come in for several months, as this could stall the lettings industry with tenants deciding to delay their moves. According to the Government, the average fee charged to tenants is £337.
Last night, ARLA reacted with outright dismay.
David Cox, ARLA’s managing director, said: “A ban on letting agent fees is a draconian measure and will have a profoundly negative impact on the rental market. 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.
“Most letting agents do not profit from fees. Our research shows that the average fee charged by ARLA licensed agents is £202 per tenant, which we think is fair, reasonable and far from exploitative for the service tenants receive.
“These costs enable agents to carry out various critical checks on tenants before letting a property. 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.”
This morning, Lucy Morton, head of agency at JLL, said: “Charges made by letting agents to tenants at the commencement of their tenancies should have been levied only to cover reasonable administration and referencing costs. However, this has been abused by some agents who have been overcharging for their gain and to the detriment of tenants.
“Reasonable charges including referencing costs may now be charged to landlords which in turn may then be added to the annual rent. It is essential that agents do not cut corners and fail to carry out stringent referencing checks.”
Alan Ward, chairman of the Residential Landlords Association, said: “This will not help tenants, especially those who are ‘just managing’.
“Agents’ fees have to be paid by somebody. If any extra 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.”
Isobel Thomson, chief executive of the National Approved Lettings Scheme, this morning sent an email out to all NALS members describing the ban as “an easy political win but one which directly affects your business”.
She said NALS would continue to lobby on members’ behalf, and added: “We have been signposting this direction of travel for some time and said in September that we believed the sector has been sleep-walking into this decision”.
She said that the Fair Fees Forum, which NALS has only just set up and which has had one meeting, will remain in existence.
However, Rob Ellice, CEO of online agent easyProperty said he welcomed the ban which he said would create a “fairer playing field” for tenants. He added: “Any sensible agency won’t pass on these charges to landlords, due to competition in the sector, so we don’t foresee rent rises.
“Having the Government step in to abolish these fees is another example that the industry cannot self-regulate and be fair to consumers.” EasyProperty does not charge tenants, other than levy a £24.99 fee if there is a change on an AST agreement. Landlords are charged £49.99 if they request referencing.
In initial trading today, shares in Foxtons and Countrywide led the way downwards. By 9am, shares in all listed agents had fallen across the board by up to 10%, including Savills and Purplebricks.
However, the rental sector is not the only challenge facing the Chancellor, as new official statistics show that the sales market is in serious trouble – despite attempts to massage transaction figures.
