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Why the government wants to introduce a lettings fee ban

The Government has launched a consultation paper on its proposal to ban letting agent fees, but, says Sheila Manchester, it’s more a ‘done deal’ than a proposal.

Sheila Manchester

Parliamentary debate on Letting Fees imageLetting agencies across the UK will not be able to charge any fees to tenants if the Government’s proposals are implemented.

The publication of the Consultation Paper leaves us in no doubt that there will be a total ban on fees, as suggested by Baroness Hayter at the ARLA Propertymark conference in March.

This isn’t a case of rattling cages to get the message through to agents that their fees may be disappearing, if they do not receive suitable responses from the consultation – this document says that the ban will happen, it is just a matter of how and when it is implemented.

DCLG says, “DCLG officials undertook market research of letting agent fees. We randomly chose 50 agents of differing sizes and models (i.e. franchises, independents and national branches) across the country and searched their website for a list of letting fees charged to tenants. This exercise reinforced how difficult it is for tenants to both find and compare agent fees since it was not always simple to either find the fees on the agent’s website or to understand exactly what was included in them.

We would not expect the full level of tenant fees charged by agents to be passed onto landlords.

“The findings demonstrate that the fees charged to tenants vary considerably amongst agents, even though the services provided are broadly similar and that in some instances the fees charged can be significant. Generation Rent’s findings also demonstrate the inconsistency in fees charged. They found that, for two tenants, reference check fees ranged from £20 to £570; charges for tenancy agreements ranged from £48 to £480; inventory costs ranged from £50 to £216.”

So, it seems that on the basis of a random sample of just 50 agents, the whole letting agency sector will be unable to charge any tenant any fees at all, mainly because the fees are inconsistent.

Strangely, it isn’t relevant that fees for pretty much every service any person ever undertakes are inconsistent, many spring to mind – council tax, parking fees, council owned leisure facilities, train and bus travel… and equally variable is the quality of services provided by those suppliers.

RATIONALE FOR INTRODUCING A BAN

So why the focus on lettings fees? Paragraph 47 declares:

“Whilst most letting and managing agents provide a reputable service, a minority of agents offer a poor service and engage in unacceptable practices. Some agents may be motivated to act in their own interests, which may be contrary to the interests of the tenant or landlord. Some letting agents exploit their role as an intermediary between the tenant and landlord by imposing unfair charges on the tenant or double charging tenants and landlords for the same service. Shelter’s 2013 report found that nearly one in four people in England and Wales feel that they’ve been charged unfair fees by a letting agent.” Paragraph 80 also warns against any ideas of hidden charges to tenants:

“Agents will need to consider their business models in light of the ban and consider how they should charge for their services. The time of, and the services provided by, letting agents should be reimbursed but this should be by landlords rather than tenants. We would not expect the full level of tenant fees that are charged currently by letting agents to be passed on to landlords since there is evidence that a number of agents are charging excessive fees and that some agents are double charging landlords and tenants.”

INDUSTRY BODIES RESPOND

David Cox, Chief Executive, ARLA Propertymark, said, “The Government’s housing policy is shambolic and today’s consultation contradicts its already stated aim to encourage longer term tenancies. Independent analysis launched at ARLA Propertymark’s annual Conference last week revealed that if an outright ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.

“The decision is a short-term crowd pleaser and we are disappointed DCLG has not considered our proposals in today’s consultation. We urge the Government to use this process to think again to ensure that consumers, and the wider economy are not penalised by contradictory Government policies.”

Chris Norris, Head of Policy at the National Landlords Association (NLA), said, “We’re particularly concerned that the scope of this consultation appears to have drifted to include tenancy deposits, with suggestions that a ‘cap’ may now be necessary. This looks like yet another attempt to affix a sticking plaster to a perceived problem without really understanding what is driving behaviour in the real world.”

Richard Price, Executive Director of UKALA, said, “Small agents are drowning in constant policy interventions. The publication of this consultation in isolation, at a time when we’re awaiting further proposals on requirements for all agents to hold client money protection insurance, is proof that this Government does not have a clear vision for the future of the sector.

“If they really want to completely regulate letting agents then why waste time by constantly moving the goal posts?”

DOWNLOAD THE WHOLE DOCUMENT HERE:

https://www.gov.uk/government/consultations/banning-letting-agentfees- paid-by-tenants

PLEASE COMPLETE THE SURVEY _ HAVE YOUR SAY:

https://www.surveymonkey.co.uk/r/dclglet

May 1, 2017

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