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Fees Ban - landlords to be hit most, Scottish experience suggests

A major Scottish property management firm says agents and landlords south of the border should prepare now for the likely agency fees ban - and it says experience in its own patch suggests landlords will absorb most of the fees loss.

D J Alexander is one of the largest family-run property management companies in the UK, managing over 5,000 properties and offering legal and financial services.

It is warning that agents and landlords in England and Wales must act immediately to prepare for the loss of £240m a year in fees when the government’s Tenants Fees Bill - which reaches the committee stage in the House of Commons next week - is likely to be law in spring 2019.

The Westminster government has estimated a loss of £240m a year in administration fees for landlords and letting agents in England and Wales which could have an impact on jobs and the viability of some agencies.

“Landlords and agents cannot ignore this change which is inevitably coming so must put in place appropriate measures to deal with any loss of income and ensure their business is operating in a legally appropriate way” explains David Alexander, the managing director of D J Alexander.

In addition to the loss of agency fees the Tenants Fees Bill legislation will also cap holding deposits at a maximum of six weeks rent; cap the amount that can be charged for a change to tenancy at £50; introduce financial penalties for landlords who persistently breach regulations; bring in Trading Standards to enforce these regulations; and amend the Consumer Rights Act 2015 to specify that letting agent transparency requirements also apply to online property portals.

“Similar changes were implemented in Scotland in 2012 which ended agency fees and cleared up deposit holding by landlords and agents and generally most have coped well with this. The bulk of the fee loss is likely to be absorbed by landlords, but they will be creating a more trusting and attractive environment for their tenants which generally results in greater demand and consequently increased rental returns” says Alexander.

“For the professional landlord this is an opportunity to generate a transparent, open, and honest relationship with their tenants which generally leads to longer term tenancies, greater trust, and increased revenues in the long term. Setting the highest standards for letting is something that everyone in the sector should aspire to and achieve” he adds.

Poll: Scotland shows a fees ban isn't necessarily bad news

PLACE YOUR VOTE BELOW

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    The headline is wrong! Landlords in Scotland have been beneficiaries of the ban through much increased rents.

    As per the Citylets index from Q1 2008 to Q3 2012 Edinburgh rents rose by only 6.2% (well below inflation) since the ban they have rose by a massive 34% (well above inflation).

    The reason for this is that tenants have more money in their pocket at a time when they are competing for the same properties (demand pull inflation).

    Property Management in Edinburgh is still very competitive and it has not been possible for agents to pass on these costs to Landlords but the loss to agents has been partly offset in that higher rents mean higher management fees.

    There are still though Property Management Companies in Edinburgh who are asking tenants to pay referencing companies direct a practice that is probably illegal.

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    It is obvious that extra costs will be passed on to end user as in every single other business. Rents have to rise to make up the loss, there simply is no other option.

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