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Agent outraged at government “kick in the teeth” over fees

A Birmingham agent has branded the government’s draft Tenant Fees Bill - which proposes a ban on letting agents’ fees on tenants - as “a kick in the teeth” for the industry. 

“We need the government to take into account the views of lettings agents across the country, before it goes ahead and introduces this Bill. This will do such damage to the residential sector, and especially to tenants in the long term” claims Andy McHugo, lettings manager at agency James Laurence.

“The tenants referencing costs in particular are essential to ensure the tenant has reliable references, and is able to pay the monthly rent and other associated costs. It is a prudent approach to take.

"Charging the landlord even more to carry out these checks will lead to rent increases, as Scotland has seen after it introduced the ban back in 2012. Hitting a tenant harder in the pocket is exactly what the government wanted to avoid, but it will be the inevitable result.

"Without these fees many landlords will be at risk. Whilst there will be questions raised about the agent absorbing the costs, why should landlords be out of pocket for credit checking and referencing applicants who may fail the checks, change their mind about becoming the landlord’s tenant or even take advantage of the reduced obligation by applying for multiple properties?”

Under the proposed legislation tenants can be asked to pay only their rent and deposit. It will also limit holding deposits to no more than one week’s rent, and security deposits at no more than the equivalent of six weeks’ rent.

The Tenants Fees Bill will also prevent letting agents from double charging both tenants and landlords for the same services and local authority trading standards teams will be charged with enforcing the ban. 

  • Mike Georgeson

    I had a quick look at their website and can't see the fees they currently charge tenants.

  • Kristjan Byfield

    Spot on Mike- before having a rant about the gov over-regulating always a good idea to show you are at least compliant with current regs. I couldn't find their tenant fees and charges anywhere on their site either! We also all know there are plenty of referencing options now- some are free if you take a warranty, others can be secured for under £10 per person.

  • icon

    HELP........
    - Fees are band
    - Agent passes charges LL
    - LL increase rents
    - If agent is managing % £ per month goes up so more £ per month for agent
    = Fee ban results in more £, excellent, what an I missing??

    Michael Lee

    The fault with this equation is that on average fees from tenants make up 20% of turnover. This doesn't always equate to simply increasing your landlord fees by 20% though. Say for a mid sized agency with 500 managed properties and a turnover of £450,000 this would equate to £90,000 lost income. This would equate to £15 per property per month increase. In Derby we I am, the average rent is £550 and average management fee 8-10% so £45 to £55 per month this would equate to a 27% increase in landlord fees at 10% and 33% at 8%!! Are you seriously expecting all your landlords to roll over and accept it? Are you then factoring in that a large proportion will take the mindset that the tenant fees were only charged at the time when they required new tenants. Therefore why should they pay extra each month for properties that have settled tenants and don't require re-letting! Are you factoring in that when coupled with all the other government legislation changes recently introduced such as mortgage rate relief and stamp duty levy that landlords aren't going to self manage, stunting managed stock growth and landlords withdrawing?! Those 3 examples alone create huge headaches and are where your issues are. I don't know how you run your agency but it really isn't as simple as you have outlined for what I would assume to be a huge proportion of agents small and large.

     
  • David Bennett

    .... a spell checker, JP! You are right.

  • icon

    It has always seemed odd to me that these fees aren't part of the running cost of the LL's business.
    In my other business I don't charge my customers to take a reference if they want credit, I don't charge them an additional fee to sign up to my "pay monthly" software solution and I don't charge them a fee to stop being a customer (which involves various technical & accounting procedures being implemented).
    I absorb all these costs in to the cost of running my business and as it's part of my costs, I make sure that they are all done as cheaply and efficiently as possible.
    I agree with the Government on this one (that's a first !) - there is no incentive for a landlord to negotiate a good deal with their management company if all the fees are outside their business.

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