Update on Ban on Letting Agents Tenant Fees

It is now clear that the proposal to ban letting agents from charging fees to applicants/tenants in England is a matter being adopted by three of the major political parties. It appears in the Conservative, Labour and Liberal Democrat election manifestos.The public consultation taking place at present (closes on 2nd June 2017) is generally thought to be a mere formality and the reality is that, subject to details, the ban is likely to be introduced in October 2018.So what does this mean for letting agents, landlords and tenants?

  1. Letting agents

The ban will potentially leave a significant shortfall in revenue for the business. This comes on top of a number of additional services which have been provided over the last few years due to the introduction of many pieces of legislation and for which costs have been absorbed at no extra cost to the landlord or the tenant. These include:

  • Right to Rent checks,
  • Monitoring and implementation of Gas Safety checks
  • Monitoring all properties with solid fuel appliances ref introduction of CO detectors
  • Introduction of regulations relating to Legionella,
  • Printing costs for the provision of the EPC prior to letting
  • Printing costs for the provision of the “How To Rent” brochures prior to letting
  • Handling Deposits and registration with the Deposit Protection Service
  1. Landlords

The Association of Residential Letting Agents (ARLA) has suggested it is likely that landlords will be asked to shoulder up to 75% of the loss of revenue to agents as a result of the ban on tenant fees. This may be compensated for through a rise in rents (see below).At least 25% of the loss will fall upon letting agents who will either have to absorb the loss or find innovative ways of making efficiency savings in the letting process.

  1. Tenants

It is believed that rents will rise to compensate landlords for having to shoulder their increased costs. On average this is likely to be by about £25-30 pcm.Also, it is likely that tenants could be required to provide their own references and credit checks by using an approved referencing agency, thus paying the referencing agency for this service. This will provide tenants with a dossier which can be provided to any letting agent in support of an application for a tenancy. They may also be required to undertake more roles in the application process – think Easyjet booking rather than a package holiday! Exemptions.It is likely that there will be exemptions to the ban and these may include:

  • The taking of Holding Deposits (possibly capped at 2 weeks’ worth of rent) to avoid multiple tenancy applications with subsequent timewasting being made by applicants. These deposits would then be set against either first months’ rent or the Tenancy Deposit.
  • In-tenancy management charges (eg charge for loss of keys, late rent payment fees)
  • ARLA is calling for: cost of referencing, cost of Right to Rent to be exempted

Letting fees have been banned in Scotland since November 2014. Please see the article using the following link with comment on the introduction of the ban and streamlining the purchasing process. http://www.propertyindustryeye.com/conservatives-pledge-to-reform-the-home-buying-process/