In last year’s Autumn Statement, the Chancellor announced the Government’s intention to ban letting agents from charging fees to tenants. These charges, for everything from collecting references to administration costs, can add up to as much as £800, in addition to the deposit and rent in advance.
This has been welcomed by tenants groups, but both landlords and some conservative MPs have expressed doubt about the proposals.
The Issue of Fees
Upfront fees, charged either by landlords or letting agencies, are meant to cover costs, but it’s been suggested that they’re sometimes used to make a profit. Extra fees can be piled on for things like moving in at the weekend, and discontent with these practices has led to a petition signed by a quarter of a million people.
On the other hand, an outright ban on charging the tenant, as proposed by the Chancellor, will mean the bill for these charges being passed onto landlords, many of whom are operating on a narrow profit margin. It’s even been suggested the ban would rebound on tenants, since landlords would be forced to raise rents to cover the costs.
What’s Happening with the Ban?
The announcement last autumn was simply a statement of intent, but the petition and prompting by the Opposition recently led the Government to announce the start of the consultation process. This will involve landlords and tenants groups, local authorities and other interested parties, and it’s likely to take some time before any ban can be made law.
Of course, this was the plan before the announcement of the election, which will probably delay the process. How it goes forward afterwards will almost certainly be affected by the make-up of Parliament after 8th June.
Possible Effects
Assuming that the process carries on as planned after the election and the ban eventually comes into effect, what’s it going to mean? Many opponents foresee sharp increases in rents as landlords pass on the costs, but this isn’t inevitable. Scotland has had similar restrictions since 2012, and a recent survey by Shelter suggests that the expected increases haven’t happened.
One possible reason is that landlords, unlike tenants, can exert a genuine market pressure on letting agencies. If landlords are shopping around for agencies that charge lower fees, this could create competition and benefit landlords and tenants alike.
It’s not certain what the Government will decide, or what effect their decision will have. Any landlords worried about the future are welcome to get in touch for a chat.
