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Agents fear fees ban will damage quality of references and services

Many agencies have spoken out in dismay at the announcement by government that letting agency fees on tenants would be banned in England in the near future. 

Chancellor Phillip Hammond, in his Autumn Statement yesterday, said the ban would apply to England and be introduced “as soon as possible”. It is thought this may be after a consultation period with the industry and other interested parties, starting in the New Year; primary legislation will also be required, which may take some weeks after the consultation has been completed.

Stephen Ludlow, chairman of London-based agency Ludlowthompson, says there is a danger that some letting agencies will cut back on investment in marketing, training and quality control, therefore diminishing customer service delivery.

"Without reputable letting agents fully committed to the sector we will potentially see more lettings back in the hands of unregulated private landlords, and leaving tenants with far lower levels of protection than at present” he says.

"The last 30 years has seen service standards in the private lettings market increase quite significantly. Cut off the income of this sector and it risks creating a race to the bottom in levels of standards” Ludlow warns.

“It is essential that agents do not cut corners and fail to carry out stringent referencing checks” warns Lucy Morton, the former ARLA president who is now head of agency at JLL.

Hunters - which in September and October commissioned a survey on fees - says it resulted with 75 per cent of tenants stating they did not want rents to increase to cover the cost of banning lettings fees.

“Agents perform both a service and a paralegal role when assisting tenants to move home. Unfortunately, it is very likely rents will increase in response to these changes” says Hunters’ managing director, Glynis Frew.

Nick Leeming, chairman at Jackson-Stops & Staff, reflects the views of many in the industry when he says this “short sighted” measure means costs will simply be passed on to tenants through higher rent by landlords. 

“While the ban still requires a government consultation before it is implemented, its impact on the UK housing market could be far reaching. Affordability issues which surround purchasing homes means that for many, the only option is to rent. We’ve seen a consistent reduction in the number of landlords buying investment properties since April this year which means that fewer rental properties are now coming on to the market to serve the growing rental population” says Leeming

“A better solution would have been to create a more competitive fee environment and ensuring that landlords are not further discouraged from the market” he adds.

Traditional London estate agency STANLEY Chelsea, run by former NAEA London region chairman Patrick Bullick, already has a policy of not charging tenants and says it passes no judgement on other firms in the industry which choose to charge - “as long as fees are transparent, reasonable and representative of the actual costs incurred by the agent.”

And 60-strong London agency chain Dexters says it is in favour of the ban. 

“Whilst we await the exact detail of the legislation we broadly welcome the government's action on this. We would prefer to see compulsory regulation of letting agents but this is a step in the right direction, as it will lead to more transparency and make life difficult for rogue estate agents” explains chief executive Jeff Doble.

easyProperty chief executive Rob Ellice also says he welcomes the Chancellor's decision.

“Any sensible agency won't pass on the charges to landlords, due to competition in the sector, so we don't foresee rent rises as there is no need to add the fees to rents. Having the Government step in to abolish these fees is another example that the industry cannot self-regulate and be fair to consumers. The greed of a few has cost the many as it’s a minority who have charged excessive fees rather than the majority of agents” says Ellice.

  • John Ahmed

    A total ban on fees has not been thought through by Hammond. A cap may have be sensible, but a total ban will cause higher rents and less available quality rentals this along with the stamp duty will hurt housing transactions, agents corporates and ultimatly then tenants. Not to mention the refurbishment of poor quality and unsold property that some landlords have been investing in.


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    Be careful for what you wish for. The reason for this ban is because of the naked exploitation that was taking place in what many believe is a captive market. If rents are seen as the place to exploit, we will very soon see rent controls.

     
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    We may think landlords can charge more on rental, we forgot it will take longer to find tenants. The government has loaded so many more expenses on landlords, the rent has reached its limit in affordability. That means, landlords are losing more yield. When the government hurts the middle class, the economy will be affected in the long term. And what makes people think the tenants are not richer than landlords, where is this idea coming from? I trust our wise government knows about it, or this is all for their politics? Perhaps we need another Trump who knows how to grow economy.

  • Kristjan Byfield

    Initial thoughts today are that the emphasis on the pending legislation is regarding 'upfront' fees- does this potentially mean this will be mostlly, if not entirely, mitigated by and 'end of tenancy' charge? What's more, claims that this could lead to damaging refernces and services- the reference quality should not be affected at all as any Landlord should be happy to cover applicable costs however with plenty of viable, quality solutions out there at £10-25 per tenant I am not sure how such claims are really justified. As for regional agents, indeed, services may be hampered by this unless they can recoup these costs elsewhere from the Landlord or in charges applied to monthly rental payments.
    I have limited sympathy for the likes of Ludlow Thompson who have an admin fee that has a minimum fee of £350 + VAT but actually charges 1.5 weeks' rent + VAT. If their average rent is, like ours, around £450 pw this means that they typically charge Tenants £675 + VAT. It is this greed (charged in addition to Landlord fees of around £2k for such a let) that has caused this very issue. This is the profit-mogering approach that has caused this very act of government. In comparison our average fee is £192 (oh and LT charge a Check Out fee too). Complaints from such agents leave a very bitter taste in the mouth and its is the small, regional agents I truly pity in this instance.

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    What I can't understand is that fees + VAT means that VAT enters the national coffers. Rent has no VAT. Where is the exchequer going to get this income shortfall from? So while there is talk about the huge national debt, and falling government income, the Chancellor has eliminated a source of VAT! Has this man gone barmy or what? By the way, has no one told the Chancellor there isn't a housing crisis north of Birmingham?

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    And with the shortfall on the increased stamp duty receipts expected by HMRC is there any doubt as to where the extra money will be coming from?

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    My concern from all this is if we (agents ) cannot take a fee what stops potential tenants making multiple applications with no recourse thus wasting our time and our clients money?

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    No vision, no plan in our government.

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