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Fees ban: here's a calculation of how much it might cost landlords

City investment consultancy Jefferies has calculated the impact on landlords if the country’s second largest agency group - LSL Property Services - distributed fees currently levied on tenants on to landlords instead.

Yesterday LSL, which includes high street brands Your Move and Reeds Rains, reported to shareholders that its underlying operating profit for 2016 would be in line with expectations. Lettings revenue grew by seven per cent in the first 10 months of 2016.

Now City consultancy Jefferies - which has praised the LSL results in the light of Brexit and the economic uncertainty - has used LSL and Direct Line data to calculate what may happen once the Autumn Statement pledge of “banning” agency fees on tenants is conducted.

“If all the tenant fees were passed on to landlords, the average rent across England and Wales of £887 per month, would only need to increase by £8.65 per week for the landlord to cover additional charges of £450 over a 12 month tenancy” says two Jefferies analysts, Anthony Codling and Sam Cullen.

“According to Direct Line's landlord insurance team, the average tenancy lasts 18 months, suggesting that a rental increase of around £5.75 per week would cover the £450 additional costs” they say.

  • icon

    this makes no sense at all....

    a rental increase of £5.75 a week would produce an increased management income of 57.5 pence a week if the agent charges the typical 10%+VAT. over 18 months that would generate £44.81 over 18 months...

    IF the agent were to increase their fee from 10%+VAT to 12.5%+VAT AND the landlord increase the rent from the average of 887 to a new average of 918.31 then and only then would the landlord and the agent be in the same financial position.

    The Lettings Guy

    The article is suggesting that the tenant fees (in this case £450) normally charged to the tenants are passed to the landlord by the letting agent on the initial sign up/lettings fees. This would mean the letting agent is not loosing out at the beginning of the tenancy as they are receiving the usual amount they would now. In fact if the landlord then increased the rent to compensate for this initial increase, with the increased rent and management fee the letting agent would actually be £44.81 better off over the 18 months!

     
  • David OConnor

    The Landlord will normally be under a management contract. So that will not easily be changed. If charges go up for landlords many Landlords will go for the cheap low service option or the find a tenant only option that many now offer.

    These models are either 'not transparent' (hidden costs) or they do not generate enough income to have experienced professional working for them.

    Affect on tenant will be worst service and an increasing dis-functional letting sector.

    The Government either does not understand this sector or is engineering it to be taken over by institutional investors.

    Either way this government, with the lack of official opposition continue to attack the middle classes for the benefits of institutional investors or the super rich.

    The middle classes so need a new political party!

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