Yesterday Chancellor of the Exchequer Philip Hammond announced as part of the Autumn Budget 2016 the intention to ban tenant letting agent fees in England. This came as quite a shock especially considering that this was a Labour policy that was part of their manifesto in 2015 for the last general election, and was something that the Conservatives adamantly opposed. Bringing in this policy must surely come as a slap in the face to anyone who voted Conservative just over a year ago. I suppose we shouldn’t be surprised, after all politicians have such a bad reputation for a reason.
What will the ban on tenant letting agent fees mean?
Details are yet to be released, but it seems likely to be a complete ban on Letting Agents charging tenants fees for anything, this is based on the governments opinion that an agent works for the landlord and not the tenant. Philip Hammond has stated that this ban should come in as soon as possible, although no date will be confirmed until the details are finalised.
Who will carry the cost?
There are concerns that costs will be passed onto the landlords, who will in turn pass this onto the tenants by increasing rents. Although this may be the case it is unlikely that all costs will be passed onto tenants and a likely outcome will be that landlords, tenants and agents will all share costs long term. This is of course speculation as no one knows exactly what will happen. The main worry is that landlords will sell up creating a shortage of rental accommodation and this would have a knock on effect to the residential sales market bringing down property prices.
What Matthew James Letting Agents say
This is one of many attempts lately by the government to drive private landlords away from the property market. When I started in the industry twenty years ago it was unheard of that landlords negotiated letting fees. Now every valuation I attend landlords are always trying to drive fees down. Constant increases in taxes and restrictions on landlords have meant that the fees that agents receive from landlords has reduced considerably. This has inevitably resulted on the fees being passed onto the tenants. Whilst there may be rogue agents charging £700-£800 fees most don’t.
Whilst I accept that there are plenty of experienced professional landlords out there capable of managing their properties in a correct manner. There are also a large percentage of landlords who are not experienced in the lettings industry, and do not have the time to research the legislation that every property manager should know. The ban on tenant fees will only increase the number of self managed landlords. Many tenants I have spoken to only want to deal with an agent as they feel that they add professionalism to the management of the property and the tenant can feel secure that the tenancy and safety legislation is being adhered to. When dealing with a landlord directly it can become very personal when there is a disagreement, with an agent although they technically work for the landlord, the benefits for a tenant are clear to see.
Contrary to popular belief most Letting Agents are not rich fat cats. Many are hard working, scraping by a living, in what can be a very stressful and often volatile industry. The cost of running an office, staff, travel expenses, advertising properties and administration costs all mount up. The average fee to use Rightmove alone is in excess of £15,000 per year. Many letting agents just wont be able to absorb the reduction of income created by banning tenant fees and will close. Others may have to cut staff and costs. Ultimately whatever the outcome the banning of tenant fees will reduce the quality of property management across the housing industry.