The Queen has confirmed that the pledge to ban letting agents’ fees, which was initially announced last November in the Chancellor’s Autumn Statement, will go ahead.
The Draft Tenants’ Fees Ban Bill proposes to stop letting agents imposing fees on tenants as a condition of their tenancy. Currently, a potential tenant could expect to be charged fees from anything around £500 up to £2000. The fees are supposedly to cover the costs of obtaining references, credit checks, or investigating immigration status. However, recent anecdotal evidence suggests that many letting agencies are taking advantage of the charges and using the money for profit rather than spending it on the checks required to gather information about the potential tenant.
The new plans were revealed with the purpose of making the lettings sector more affordable and fair. The changes proposed are welcomed by those campaigning for consistency and protection for vulnerable tenants by stamping out unreasonable fees. Arguably the ban is a step in the right direction for the industry, making moving house more affordable for those who are struggling financially and to stop letting agents making a profit on simple administrative provisions required when starting a new tenancy. Moving house is already an expensive time without the need for imposing added costs and fees.
Although the proposals look quite promising for tenants, the potential implications on the letting sector could be severely detrimental. David Cox, chief executive of the Association of Residential Letting Agents (ARLA) Propertymark, estimated that the proposed Bill could well result in the loss of up to 4,000 jobs and could cost Landlords in the UK up to £300 million. The housing industry could well plummet and cease to be a financially beneficial industry to invest in.
There is no argument that vigorous checks on prospective tenants should still be carried out by diligent Landlords, which therefore begs the question of who will pay for them? These costs must be paid by someone and if the price falls on the heads on the Landlord, it is fairly obvious to predict that the Landlord will subsequently shift that burden by increasing rent fees to make up for the loss they incur by paying charges for searches. A rise in the price of rent payable over a long running tenancy will inevitably amount to a greater financial strain on tenant than the initial letting agent fee which is currently payable. The introduction of the ban could potentially have the opposite effect of that intended.
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 email us here.