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MPs wary of 'unintended consequences' of fees ban

The majority of MPs speaking at a House of Commons debate yesterday acknowledged they are wary of the 'unintended consequences' of a blanket ban on letting agent fees.

Several MPs referred to the potential implications for small businesses and low income or non-UK tenants, as well as the prospect of rising rents and job losses.

The debate - which was sponsored by Hunters co-founder and MP for Thirsk and Malton, Kevin Hollinrake - was also attended by housing minister Alok Sharma.

Sharma confirmed that the government's response to the official consultation on the fees ban will be published 'very shortly'.

Hollinrake opened the debate with a lengthy speech, outlining some of the benefits and potential consequences of a ban on fees. 

He noted that since fees were banned in Scotland in 2012, the number of agents north of the border has stayed largely the same. 

The MP said that a fees ban provides a 'challenge' but also an 'opportunity' for agents and in Scotland those 'willing to work harder' have prospered.

Hollinrake then went on to discuss the potential unintended consequences of a ban on fees in England.

He explained that tenants on low incomes may be effected if agents choose only to reference prospective tenants who are a ‘safe bet’ due to having to shoulder the costs themselves.

When asked about the level of substandard rental accommodation across the country, Hollinrake quoted figures which suggest that one million of four million private rental homes are considered as substandard.

He said that substandard accommodation should not be a characterisation of the property industry and landlords and letting agents in particular.

Hollinrake then discussed the proposed cap on holding and security deposits. He said that a cap of one month's rent on security deposits could represent 'too short' a time period.

He said this is because many tenants see their deposit as their last month's rent, while a high proportion of tenancies have damage issues at the end of the contract. He said that a one month’s rent deposit cap could therefore see landlords left out of pocket.

The Hunters chairman then tackled the issue of enforcement. "We need proper enforcement to ensure a level playing field for all companies," he said.

He explained that England is currently the only part of the UK without a central register of landlords and raised the suggestion of extending the redress schemes to cover landlords as well as agents. 

According to Hollinrake, the redress schemes have worked well to drive up standards among agents. He said that a national rental standard, backed by a lead enforcement agency could be successful. 

The floor was then given to MPs to raise their viewpoints on a range of issues. 

Charles Walker, MP for Broxbourne, discussed the importance of inventories being carried out independently. 

He said that it’s reasonable that landlords should fund inventories and that there is always like to be 'self-interest' from those who carry out the check-in and check-out process themselves.

Walker also said he has organised a meeting with mydeposits chief executive Eddie Hooker to discuss the issue of self-let landlords insuring deposits paid by tenants.

The MP for North West Norfolk, Henry Bellingham, said he had received no complaints from tenants about letting agent fees. In Bellingham's constituency, he said the average application fee is £325 and the average renewal fee is £75.

Throughout the debate, several MPs agreed with many of Kevin Hollinrake's points and referenced his considerable experience of the lettings industry.

Housing minister Alok Sharma was then invited to speak. He described the debate as 'good and balanced'.

As well as confirming that the government's response to the fees ban consultation would be published 'very shortly', Sharma acknowledged that the 'broken' housing market remains one of 'the greatest barriers to progress in Britain'.

On the specific subject of fees, the housing minister explained that he felt capping fees would be largely ineffective as it would be 'harder to understand and enforce'.

He said that a blanket ban on fees, on the other hand, will be 'easy for tenants to understand and enforce themselves'.

Sharma added that his team is currently working with industry stakeholders to create a 'How to Let' guide for landlords to complement the existing 'How to Rent' guide for tenants.

Commenting after the debate, David Cox, chief executive of ARLA Propertymark, said: “We welcome this morning’s comments from Kevin Hollinrake MP around the unintended consequences of a total ban on letting agent fees."

“It’s important that the government understands the value of the services agents carry out for both landlords and tenants when shaping its final legislation." 

“We are therefore disappointed in Alok Sharma’s comments today declaring that the government’s position remains that all fees will form part of the ban." 

"As Kevin acknowledges, the ban on fees for referencing checks will cause problems. Agents are required to carry out these checks by law, and they invest both time and resources to ensure this work is carried out properly.” 

"The government must now consider exempting referencing checks from the ban as well," he concluded.

Isobel Thomson, chief executive of the National Approved Letting Scheme (NALS), added: “[We] welcomed the cross-party debate on the fee ban and confirmation that the minister has adopted a common sense approach on holding deposits with his announcement that they will be exempt from the ban but he gave no clear indication of when legislation might come forward."

"We were encouraged that MPs quite rightly expressed concern about the implications of rent increases as a result of the ban and the impact on those least likely to afford them." 

"Of real interest was the Minister’s commitment to consider the ban on tenant fees in the context of wider work in the private rented sector, something NALS called for earlier this year." 

"This is positive news and an indication that he has listened to the call for an end to piecemeal legislation. His clear reference to regulation was welcome as well as his willingness to explore options for what a regulatory framework might look like.”   

  

  • Simon shinerock

    It sounds very confused, out of the frying pan into the fire, the mantra of modern government

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    Central Government polices designed to squeeze private sector landlords out of the market to make way for new shiny utopia of build to rent funded by taxpayers....have they learned nothing from history, we will be back to the Rent Acts before we know it.

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    This is sadly not a government that supports or encourages small business or the self-employed.

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    How can the housing minister say a cap would be confusing????
    0 fees agent charges = breaking the law
    fees capped at £150 agent charges more = breaking the law

    The minister is an accountant isnt he ? surely even he can work that one out....!!

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    Very few people seem to have gathered that this intended 'ban' has little/nothing to do with "helping tenants" and/or certainly not to make the market "more competitive". It's simply one part of a shadow agenda to destroy the PRS, in favour of corporatised developers underpinned by taxpayer subsidy. This is all about shifting the modest rewards of property ownership from the middle classes into the hands of big business - an ideal induced by the Insurers (who have seen a loss to their Pension contributions over the rise of 'Buy-to-let'), started by George Osborne, propped up by a smear campaign spearheaded by the likes of Shelter, and engineered via a manipulated Media. 'Consultation' periods, 'Parliamentary Debates', etc are irrelevant window-dressing that will make not a jot of difference to the outcome. And for anyone who still naively believes Government is based upon principles of logic, commonsense and/or decency (and/or to benefit the hard-working taxpayer) ... think again - we are but tax-slaves to a regime of control and exploitation. No politician could care less about small business and those it employs ... and a moribund lettings industry would be just another in the long line of businesses decimated by Corporate greed and the Government Mandarins with which they consort who enable such changes.

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    As I have voiced on many occasions, we live with an elected dictatorship acting as our leaders.

     
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    Government has not laid a brick in 20 years to increase social housing output
    Shelter have been used as a tool to help pay big salaries to new pension fund led companies subsidised by the tax payer
    Local Authorities have a terrible track record in terms of maintaining their housing stock
    Government is tinkering too hard...too quickly...with the market and presume private landlords will still invest in the provision of private rented homes ongoing....watch this space....landlords will leave the sector at a far quicker rate than those pension fund boys can build new high rise flats ( slums of the future ) ..where is the proper family housing going to be built , at what cost and at what yearly management cost.

    Running an economy is a balancing act....woops the Housing Minister is about to tip the balance too far too quickly and cause a real Housing Crisis !

     
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    ^ wow!! You stop agents & LL's taking the p@#s out of Tennant's and all of a sudden the whole system is one big conspiracy!

     
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    @John Peters - Whilst it might be fair to suggest that a small number of Agents take advantage of applying higher than could be reasoned charges, the VAST MAJORITY do not. Moreover, and more importantly, prospective Tenants do not have any obligation to use such 'over-priced' Agents (no different to you getting quotes from any number of contractors - and using your judgement to select which one suits you). What this paradigm shift in policy will actually do is take away a significant number of both good Agents and good Landlords from a marketplace that currently finds its own equilibrium - even a cap on fees could be arguably palatable to all parties (although, I don't see any customer caps placed on, for example, Banks' mortgage loan fees ... and/or any other industries for that matter) ... so it is difficult to see what a complete Government-imposed prohibition of such charges does within the context of the UK's economic principles.

    Since this proposed ban is not a stand-alone move, all other attacks on the PRS have to be seen in the wider picture - and, thus, the realisation of a desire to destroy the sector is an obvious unavoidable conclusion.

    In the short term (as Mark, above, points out) losing property quicker than the "Build-to-Rent" developers will be able to re-supply [thus creating rental increases - even if just for a few transitional years ?], and eventually bringing to Tenants a blandly homogenised version of high-density-only rental accommodation, lacking the variances currently enjoyed from a variety of private Landlords' differing circumstances. And if anyone could try to convince me that this will remove 'rogue' Landlords from the horizon ... I suggest they take a critical look at just how much exploitation goes on by the Corporates who now have virtual monopolies in certain service/retail sectors.

    You are certainly right about it being a conspiracy - the whole farce is an appalling example of antidemocratic social liberalism at its worst - in reality, being an underhand capitalistic con-trick, designed to enrich the few as opposed to allowing a truly mixed economy to thrive as it has been for a number of recent years.

    Few outside the industry will mourn the loss of Estate Agents' jobs - but, irrespective of such unfounded prejudices, my belief is that everyone should be able to work as they wish in a free environment, merely with sensibly workable legal constraints preventing crime.

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    Nick, you miss a vital but simple point..... When a LL or LA markets a property, and we all know supply is limited, so there is going to be multiple interested parties. If a tennant wants/needs that property, realistically he/she has NO CHOICE but to pay whatever fee is laid down by the LA/LL - the tennant can't simply walk away and if even they did you know the next mug is just around the corner. This is a captive market and a licence to print £, so I see why your so annoyed.

    Banks/loans are not the same comparative, try thinking more along the lines of a recruitment agency if you want a direct comparison.

    Your hidden agenda spouting is BS, the greed of your sector is where the fault lies - so I'm sorry but you only have yourselves to blamed!

    Have a nice day.
    JP

     
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    Nick, you miss a vital but simple point..... When a LL or LA markets a property, and we all know supply is limited, so there is going to be multiple interested parties. If a tennant wants/needs that property, realistically he/she has NO CHOICE but to pay whatever fee is laid down by the LA/LL - the tennant can't simply walk away and if even they did you know the next mug is just around the corner. This is a captive market and a licence to print £, so I see why your so annoyed.

    Banks/loans are not the same comparative, try thinking more along the lines of a recruitment agency if you want a direct comparison.

    Your hidden agenda spouting is BS, the greed of your sector is where the fault lies - so I'm sorry but you only have yourselves to blamed!

    Have a nice day.
    JP

     
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    Disappointing that nobody bothered to research the relationship between the ban on Agent fees and rent increases in Edinburgh. If they had then they would realise that this policy is a lose lose situation and a cap would achieve the desired objective without leading to rent increases (win win situation).

    Our firm lost significant fees as a result of the ban, about enough to fund the Shelter MD's wage for half a year.

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    I just can't see how the rent rises will become reality. For this to happen LAs will need to lump the fee onto LLs so they pass them on in higher rents.
    It's going to take some ballsey arrogant LA to inform the LL you're doubling THEIR fees when they're necks are being squeezed to death due to S24 etc.
    @ Arnie - surely using your argument the fee ban is a Win Win. You lump the tennant fee to the LL so you still get that £, LL raises rents to offset and you take a higher monthly fee due to the same % of a higher rent?!

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