Banning letting agent fees could backfire on tenants
On the face of it, the Government’s moves to ban letting agent fees will be widely welcomed by tenants who feel they are made to pay over the odds for services which aren’t always transparent.
But while this might be portrayed as the Government fighting the corner for embattled renters at the expense of large, wealthy property owners with deep pockets, the truth is more complex.
In fact, some would say this Government intervention is heavy-handed and will not leave tenants any better off in the longer term.
Currently in England, many people who rent properties are required to pay letting agents for a number of up-front services. These can include administration fees to draw up a contract or to carry out credit and reference checks.
In the 2016 Autumn Statement, the Government announced it planned to ban letting agent fees “to improve competition in the private rental market and giver renters greater clarity and control over what they will pay”. The Government is now consulting with the industry and experts before imposing the ban.
In Scotland, letting agent fees were banned in 2012 and while they have not been banned in Wales there are growing calls for rules to be introduced.
Is change needed?
The fact is there have been a minority of letting agents which have charged large administrative fees. In some cases the reasons for these charges have been opaque to say the least and this sort of practice would not be defended by the majority of reputable property owners.
The average charges can range from £200 to £700 depending on who you ask, but it is the lack of transparency which has caused the most consternation.
The Association of Residential Letting Agents (ARLA), the professional and regulatory body for letting agents in the UK, is opposed to the outright ban on letting agent fees.
Critics might suggest ARLA is simply operating in the best interests of its 9,000 members but its position is entirely credible. It states: “We believe that the ban on fees will involve passing the costs on to landlords. Who will then look to recoup these costs elsewhere; inevitably through higher rents.
“It will have a drastic impact on many people and businesses and to announce it without consultation or clarity is wrong. We do not support the banning of letting agents charging fees to tenants. We believe fees should be open, transparent and reasonable. They represent legitimate costs to the business that need to be covered.”
Transparency and fairness
Perhaps there is a compromise which could be reached. A formal system which creates a fair and transparent process and improved competition without the need for legislation which could lead to higher rents.
Introducing a practice which requires letting agents and landlords to sign up to system whereby a standardised list of fees is published prominently in their offices and on their websites would achieve this.
By making the list of fees standardised, would-be tenants could easily compare the services being offered and shop around for a good deal. Letting agents wanting to be competitive would no longer be able to charge huge sums of money for services that another office down the road is pricing more realistically.
If the number one goal for all of this is fairness and transparency then being up front with these fees makes more sense than risking the charges being passed on in other ways.