Under initiatives to be introduced in today’s Autumn Statement, landlords and letting agencies will foot the bill as the Government seeks to assist people living in the private rented sector – the Chancellor, Philip Hammond, has announced a ban on letting agents charging fees to tenants.

Mr Hammond’s intended measure, to take effect as soon as possible after consultation, takes aim at fees levied by most letting agents to new and prospective tenants as a matter of course for things like administration and reference-checking, etc. Until now, letting agencies have been able to charge both tenants and landlords for administrative services such as checking references, preparing a tenancy agreement, renewing a tenancy and ending a contract.

The apparent aim is to help the millions of households in private rented housing by sparing them what can amount to hundreds of pounds in fees. The news will no doubt be welcomed by consumer and tenant groups, as Farleys understands that recent research from the Citizens Advice Bureau has found that letting agents charged a nationwide average of £337 in fees, though in some cases this figure can be much higher.

Letting agents’ and landlords’ groups have been predictably critical of the measure, with some suggesting that the fees charged for things like reference checks help to prevent dishonest or fraudulent tenancy applications.

Letting agencies’ options would appear to be two-fold: i) pass more of those charges on to landlords; or ii) absorb part of the costs themselves, and neither of these alternatives is likely to be well-received. Speculation is already mounting that landlords will simply pass on any increase in their costs to the tenants themselves, resulting in ever-increasing rents. In areas where the rental market is highly competitive, however, landlords may have little option but to bear the increased costs themselves, meaning that for many landlords with small portfolios the buy-to-let model may lose much of its appeal.

In response to news of the announcement, shares in some letting agents fell sharply. Shares in noted London estate agent Foxtons, for example, were reported to have seen a fall in value of 10.6%, while shares in Countrywide were down as much as 5.5%.

However this proposed measure is to take effect, it is likely to cause consternation in some quarters – we await details with interest.

Whether you are a landlord or a tenant, Farleys Solicitors LLP has an experienced team of property and litigation solicitors who will be happy to assist in any way they can. To speak to one of our experienced solicitors please call 0845 287 0939 or complete our online enquiry form.