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TODAY'S OTHER NEWS

Agents invited to provide last-minute views on the Tenant Fees Bill

Letting agents - and anyone with ‘relevant expertise and experience or a special interest’ - have been invited to provide their final say on the Tenant Fees Bill as it moves through Parliament.

Now that the Bill has passed a second reading in the House of Commons, it will be considered by a Public Bill Committee.

The Committee is now able to receive written evidence from interested parties and will review any submissions, considering them for any potential amendments.

The group is expected to meet on Tuesday June 5 for oral evidence sessions and the Committee Stage must conclude by 5pm on Tuesday June 12.

It can, however, conclude before the June 12 deadline and at this point it will no longer be able to receive any further written evidence.

"The sooner you send in your submission, the more time the Committee will have to take it into consideration and possibly reflect it in an amendment," reads a statement posted on the government website.

Written evidence and views can be submitted to scrutiny@parliament.uk.

Following the Committee Stage, the Tenant Fees Bill will have to pass through a Report Stage and third reading in the House of Commons.
It will then make its way through the House of Lords and an amendments stage before being granted Royal Assent which is when it formally becomes law.

Earlier this week, the Tenant Fees Bill - which aims to outlaw upfront fees charged to tenants as well as capping security and holding deposits - passed its second reading in the House of Commons with a unanimous verdict after a three-hour debate.

The national charity Citizens Advice has since urged the government to review the default charges clause which it says could be used as a loophole by agents and landlords who want to continue to charge tenants once the ban becomes effective.

Poll: Do you expect any significant amendments to be made to the Tenant Fees Bill?

PLACE YOUR VOTE BELOW

  • Angus Shield

    The email link just rejected my written view with: : host mxb.speednames.com[185.26.230.90] said: 550 We don't handle mail for parliament.co.uk (in reply to RCPT TO command).

    This was my Written view:

    Dear Sir

    My credential is that I again own an independent Letting Agent (in its 5th year) and previously an Equity Partner in a multi-office independent Letting Agent; a total of nearly 20 years now.

    Our area of trading is the SP1 -5 (Salisbury & South Wiltshire which is very ‘MOD’) and SE London. Many of our Landlords are ex-services, diplomatic and Civil Service with many independent traders also. Our Tenant base is largely scientific (Porton Down), medical and educational.

    1. To remove the ability for Letting Agents to receive a reasonable fee for the services they provide would be foolish.

    • As Agents we perform a semi para-legal service in creating a legally binding contract under the Housing Act; it is a conveyance. Nobody would expect an estate agent or solicitor to undertake the same for no charge.
    • We ensure that the accommodation complies with Prevailing Regulations (gas, electricity, EPC, minimum standard, HMO, etc). Nobody would expect a surveyor to undertake the same for no charge.
    • We also undertake VAT returns, Overseas Landlords tax administration and now swamped with GDPR. Nobody would expect a book-keeper or auditing accountant to undertake this for no charge.
    • This takes considerable resources and requires funding from our own rewards for effort. With staff, rents & insurances already consuming much of the Landlords fees received.

    2. To apply a moderating, prescriptive legislation would be wise.

    • I am personally aggrieved that some agents do profit unreasonably from Tenant Fees and that some larger agents are so reliant on Tenant Fees that is would strategically effect their business operational/model. I am also aggrieved that some Franchisees/Principles/Proprietors can also ‘disappear’ with client funds. Many who have commented within the forums (such as Estate Agent Today), call for compulsory licencing or levels of acceptable and appropriate fees (such as a maximum percentage of turnover?). Licencing should be linked to Client Money Protection (similar to car MOT = Motor Insurance).

    3. In conversations with both Landlords and Tenants our parochial view is:

    • Tenants expect to pay reasonable fees for the service they receive – its business. They do not expect to compromise their own paid time/holiday to sort out their move beyond the physical event. They expect correct and accurate documents to represent and protect their contractual position and offer recourse.
    • We are increasingly being asked, by applicants, ‘will our rent go up or can we still pay a fee’?
    • Our average tenant fee is £500 incl VAT (per tenancy and not per person) and a once only, up front charge; nothing to renew or end their contract.
    • Our Landlords are concerned about the shift in ‘lost’ fee income onto them; it would be directly proportion to tenancy creations.
    • I would expect a rent increase of between 12-15% for local agents to recover their fees through landlords commission payments received from rents.
    • If the Deposit Schemes were to be consulted; assess what are the ‘usual’ deposit deductions they allow to claimed by agents/landlords. Consider these within permissible fees as any tenant would have the right to challenge these through the arbitration process. This would be the actual evidence of what agents/landlords often have to charge a tenant at the end of a tenancy such as cleaning, small dilapidations, rent short-fall, etc. This is self-evidential and available from a previously enforced scheme.

    As a small business we DO NOT budget on Tenant Fee income as it can only be an approximation of future tenant activity; however we use these funds to develop the business through training & subscriptions and updating technology, working environment, etc.

    We hold Pi & PL Liability insurances, Property Ombudsman membership, Client Money Protection and Custodial Deposit Protection (The DPS).

    As agents we are no different to any other business receiving an income for their services offered. Please do not take this away from us as we are not centrally funded (from our tax money generated through our business/employment activities), whereas many of the ‘objectors’ are.

  • icon

    Hello, I had the same issue the email has bounced back sent to Parliament.

    Dear whom it may concern,

    I have been keeping up to date with the tenant fees bill making its way to becoming law.

    I would like to keep it very brief. Notably a ban on fees is not the wisest of plans. Instead there should be a cap on the amount charged after a survey is conducted after knowing what reference agencies typically charge.

    Tenant’s costs cannot and should not be passed onto landlords and agents. A tenant would like to rent; therefore, they should cover there referencing costs. For example, a landlord or agent could absorb the cost for one applicant but usually it’s much more, couples, sharers and families. This is a lot of money for a landlord or agent to cover. On the flip side applicants have the option of withdrawing from negotiations, if this was to happen it would be unfair for the agent to pick up the invoice and it would be embarrassing to pass onto the landlord.

    I totally agree that a lot of companies take advantage but allowing a ban would not solve the issue. The reaction to this would be, rents would be increased which would make it even more unfordable for the average worker. The lettings industry clearly needs a level playing field therefore a cap on the amount to be charged for reference checks and tenancy agreement/admin costs would be better.

    A lettings business is like any other business, therefore for the service provided a fee should be paid. For example, our reference fee is very low and it cover the reference and right to rent checks and the extra £10 goes towards the lodgement of the file and processing costs. Our tenancy agreement fee is 50/50 between the landlord and tenant and this fair as they both are going into an agreement with one another on a 50/50 basis. Our agreements are drawn up professionally and we pay a fee for a well drafted fair tenancy agreement. Yes, some letting agents use a very weak agreement which they overcharge for which quite rightly is not correct.

    I am a new business that has been trading for almost 1 year. My costs relating to tenant fees are fair and low, I have client money protection for landlords and tenants. As a new business it’s hard enough building your business and reputation with the added obstacle of covering tenant fees from our turnover or risk losing landlords if the fee was upped.

    As an agent we are no different to any other business we receive an income for the services that are provided. I also believe the rogue; unqualified agents are the ones who have caused tenant fees to go in front of the government. Instead if mandatory qualifications and affiliations are sought then each governing body can restrict the amount charged in accordance with their membership.


  • LAT Admin

    Hi Angus, Son,



    The email address originally provided in this story was incorrect. Responses should in fact be sent to scrutiny@parliament.uk.



    Please accept our apologies.



    Letting Agent Today.


    icon

    Thank you.

     
    Angus Shield

    Your message did not reach some or all of the intended recipients.

    Subject: Tenant Fees Bill
    Sent: 25/05/2018 07:59

    The following recipient(s) cannot be reached:

    'scrutiny@parliament.uk.' on 25/05/2018 07:59
    Server error: '550 5.7.0 Incomplete email address [angus@salisburyblockmanagement.com] [scrutiny@parliament.uk.]. See http://spamauditor.org/best-practices/require-full-email-address/ for more information. Protection provided by MagicSpam 2.1-8 http://www.magicspam.com'

     
  • icon

    I am entering the lettings market as a startup and do not understand the reasoning behind the need for tenants fees. Tenants are often told that the letting agent doesn't work for them but for the landlord. However, once you take a fee from them you are effectively working for them. Tenancy agreements, checks on the property etc. should be charged for but these are business costs the landlord should expect to pay for. Many letting agents charge both the letting agent and the tenant for carrying out the same work which I don't believe is ethical. There are many ways letting agents can tweak their business model to make money. If they can't work this out then they don't deserve to be in business. This is my personal opinion and I know that will not be popular on this forum.

  • icon

    In Edinburgh rents spiked after the ban on letting fees and tenants were worse off.

    This was just the market reacting to the fact that tenants had more money in their pockets whilst competing for properties.

    The losers were Letting Agents and Tenants whilst the winners were landlords.

  • Antony Williams


    Truth at last: What really happened in Scotland after letting agent fees were banned

    It was a Sunday evening – August 26, 2012 – when the Scottish Government confirmed that all charges (called premiums in the legislation) levied on tenants are illegal and must cease immediately.

    Up to that point there had been ongoing negotiations between private landlord and letting agent representative organisations with the Scottish Government about imposing a cap on tenants’ charges rather than a total ban.

    This proposal was eventually discounted and the total ban on tenants’ charges came into effect – a big mistake really!

    Since then, jobs have been lost – the ban has been called ’empty desk syndrome’ and rents have risen. Agents have gone out of business, as have providers such as inventory firms.

    I forecast the same – but 15 times worse – will happen in England.

    Industry fragmentation

    The letting industry in Scotland is made up of approximately 800/900 SME businesses with private landlords in addition and separate from that figure.

    Nearly all letting agents are self-starters with the majority of offices being individual and in direct competition with each other, so consequently all letting agents came up separately with their own particular plan for dealing with the immediate income reduction – they had no choice really!

    It was this entrepreneurial spirit that meant letting agents ended up successfully coming to terms with this income reduction on an individual basis, each office coming to their own solution.

    This meant looking at their profits and losses, and identifying where they could save money and increase their charges. This inevitably resulted in increased charges to their clients, staff losses and increased rents.

    It was this individuality and industry fragmentation that has hidden the true cost of losing the income from tenants’ fees.

    Industry internal effects

    The initial effect, after offices got to grips with the reduction in budgets, was that the casual employees – property viewers and inventory staff – were not given any more work, with property managers, directors and owners taking back that work.

    Also, after a few months empty desks appeared in some offices as staff became casualties of the fees ban. These desks were completely clear – no phone and no PC. In reality, the position has gone permanently.

    And some offices downgraded their premises at the next lease break point to save some substantial costs.

    Industry external effects

    The major income into letting agents was now coming from landlords, and all offices realised that you can only squeeze so much out of a single income area.

    This decrease of income into letting agents has come at the same time where there are more property checks required as statutory.

    In addition to the gas safety check, agents also have to conduct an electrical check and Legionnaires check. Plus in addition to the EPC, agents at present have to produce a Tenants Information Pack

    And for tenant referencing – still seen as an important part of the tenant assessment process – agents now had four choices:

    Do it yourself;

    Pay for referencing yourself;

    Charge to landlords;

    Ask tenants to provide a third party reference.

    Agents throughout Scotland selected a mixture of these choices.

    One immediate effect of the fees ban was that rents increased from January 2013 to January 2014 (the period immediately following the fees ban) by 4.3%, where they had been relatively static for the previous 12 months. [Source: LSL Property Services & UKtenandata]

    Industry rental effects

    This increase meant that, on an average rental of £550, the tenants were paying an extra £24 per month equating to an extra £288 yearly, with the average charge of tenants fees before the ban having been £80 to £100 per tenancy.

    And this upward trend in rentals is continuing with average rental prices have growing faster in Scotland even than in London during the last 12 months, UKtenantdata has discovered.

    The cost of renting a property has increased by 0.9%, to £671 a month for new tenants in Scotland since April last year while existing tenants renewing their lease have seen their rent shoot up by 6.1% year-on-year to £598.

    Meanwhile in central London, new tenants and existing tenants have seen their monthly rent rise by 0.8% and 1.6% respectively.[source: Countrywide]

    So, despite what outside organisations such as Shelter say, the effects of that single decision for the Scottish lettings market have been far reaching – even extending to today’s market.

    As indicated previously, due to the fragmentation of the lettings industry, the actual effects were hidden as individual offices tackled the income problem in their own way and to suit their own business model.

    Shot in the foot!

    Landlords have exited the market due to increased cost, resulting in a decline in available private rental housing with this placing direct pressure on the already week social housing sector.

    The Scottish Government clearly hasn’t thought through the implications of the banning of fees and has pandered to the lobbyist, namely Shelter which in my opinion has provided completely inaccurate fictional figures on rent increases post-fee ban.

    So what for the English market?

    What we have seen in Scotland post fee ban will be amplified 15-fold in England.

    The effect will be the same, rents will rise, landlords will exit the market, agents will cut their cloth and all the associated third party support services, i.e. inventories providers and property inspectors will all but disappear.

    What’s the answer?

    In Scotland, agents and landlords alike entered into meaningful discussions on capping fees.

    These ended abruptly, and resulted in a complete ban on fees being charged.

    Had the Scottish Government implemented a solution that was fair for all, i.e. a cap on fees, I believe the picture today would be much different, with lower rent increases and more landlords staying in the market and even expanding their portfolios.

    A message for the English government

    Look to Scotland for the real acid test of what really happened post-fee ban.

    If you don’t, the negative effects of your decision will be around in perpetuity.

    Don’t pander to aggressive left wing lobbyist, look at the facts and act upon them.

    You need the Private Rental Sector, and your tax paying entrepreneurial English landlords can make the sector flourish given the chance.

    Don’t create a self-engineered paradox of “We need more housing” when you are on the cusp of destroying it.

    An open invitation to Shelter Scotland and England

    UKtenantdata would like to formally invite the representatives of Shelter in both Scotland and England to evaluate our rental data for Scotland for the last five years, and we would welcome your comments on the findings.



    Mitchell Thomson is business development manager (Scotland) at referencing firm UKtenantdata. He has worked in the tenancy screening industry for over a decade, and says he pretty much knows every letting agency in Scotland personally. He tells us he wrote this article for EYE because he was tired of the fiction being pedalled. He also says that it is a commonly held view by agents in Scotland that the government has no understanding of the sector and seems hell-bent on destroying it

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