The ban on letting agents in England imposing fees on tenants is unlikely to be implemented before late next year according to analysis by the Residential Landlords’ Association.
The proposed ban is currently at its formal consultation stage and is open for responses up to June 2; the Department of Communities and Local Government has confirmed this remains the case despite the shock calling of a snap General Election.
David Smith, the association’s policy director, says: “The ban will need primary legislation and so the actual implementation date is not clear but is unlikely to be before late 2018.”
In a legal note on the RLA website Smith says there are a number of issues surrounding the consultation document.
Firstly, he claims that the document demonstrates that the government believes there is wide variability in agency fees but suggests that tenants, unlike landlords, cannot shop around.
“The government is guilty here of assuming that the entire agency market is the same. In some areas landlords have difficulty shopping around as well as there are relatively few agents in the area. In busier areas where properties are frequently listed with more than one agent (such as London) there is evidence that tenants do shop around and compare agent fees” he writes.
Secondly, Smith says the mechanism of the ban is “confused” because while the government seeks to avoid landlords - instead of agents - charging the fees, it is going to be very difficult to find tenancy wording that achieves this. “This may end up being a very grey area with a lot more items being presented as options for the tenant to select and incur a fee for” he predicts.
Thirdly, Smith warns that there will be concern from landlords that limiting agency fees will mean fees to landlords will rise. “With landlords already being pressed by tax changes they may well look to increase rent to cover these new costs although there will be a cap on what the market will bear in some areas.”
In addition, Smith says another government objective set out in the consultation - to limit the size of tenancy deposits - could in theory follow the example in Scotland, where a deposit cannot exceed three times the monthly rent. Smith believes any such control could mean will ask for rent in advance or guarantors instead.
Finally, Smith highlights a major problem with fee and deposit controls of this kind - enforcement.
“The fee transparency regime under the Consumer Rights Act is largely unenforced with only a small handful of local authorities talking any formal action. The government highlighted a Generation Rent survey that showed 12 per cent of agents still not displaying fees. Personally, I suspect that it is worse than this in some areas and I certainly regularly encounter agencies which have no fees displayed” he says.