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Who really benefits from the tenant fee ban?

about 5 years ago
Who really benefits from the tenant fee ban?

So, the Government finally announced its much heralded plan to limit tenant fees charged by letting agents and landlords in this country from the Summer of 2019, more than two years after first proposing the policy.

Supporters of the policy will no doubt be giving themselves a self-congratulatory pat on the back, but what will the reality look like post June 2019 for potential tenants 

At the moment it’s a relatively good time for the rental sector. As well as the tenant fee legislation, recent figures showed that the average rents in the UK rose by just 1% in 2018, a fraction of the rises posted pre the Brexit announcement in 2015.

The property sector has become a soft target for the Government

Now as an agent who runs a small letting agency, I have to say I was a little disappointed that rather than a ban on fees, they weren’t capped – after all we are a business in an industry that is constantly under attack from this Government. I understand that unfortunately some landlords and agents have historically abused the tenant fee process at the worst time possible for tenants when they are starting the application for a property and have to find a deposit and first months rent. The current average charge is £275 per tenant, although there are some incidents of agents charging as much as £700 per applicant, when a basic credit check is usually only a few pounds.

Agents will still be allowed to make late rent payment charges and to charge tenants for the replacement of lost keys, but that will be it. The property industry seems to have become a soft target. I have never understood why mortgage lenders are able to charge arrangement fees for mortgages, that can often be thousands of pounds, yet that is never considered unfair or excessive?

However, it is what it is and I am sure there will be little or no sympathy for agents and landlords. But if anyone thinks the industry as a whole will just take the tenant fee ban lying down, I suspect they will be very much mistaken.

Some agents still have no contingency plan in place

The Letting Industry has had some time to get used to the upcoming changes and many have been working creatively to find workable solutions to the loss of income. Scarily, others still don’t seem to have anything in place.

It is a tough time for the Letting industry. There has been a slowdown in the market, with rents not rising and the increasing burden of legislation and squeezed margins for Landlords. Quite a few landlords are not re letting their properties, preferring to sell them and take their money out. This of course has the knock-on effect of less available rental stock at a time we have the largest generation rent in history.

Once the bill takes effect – agents will face a tough choice. Take the hit, which could be as much as 25% of some agent’s income, so that is a huge chunk to just write off or restructure their charges for Landlords, but that is also a risky strategy as there is already intense competition for a decreasing number of landlords. The pressure will be greatest for high street agents who have fixed costs. No doubt the budget online agents will be preparing an assault on high street agents and a charm offensive on unsuspecting landlords, but with increasing legislation, savvy landlords will know the value of using good, established professional agents will be more important than ever.

I suspect that once the dust settles, many agents will decide that they have to find ways to recover the loss of a substantial amount of income. Restructuring agreements and packages seems the most obvious. Thins that were previously included as standard may become chargeable extras. The increases may not be huge, but still significant and herein lies the problem that the Government clearly didn’t think through very clearly.

If landlord’s costs go up, they are very likely to respond by increasing rents, therefore increasing the amounts tenants have to pay over a longer period!

Ultimately, I doubt there will be any real winners from the tenant fee ban.


Whether you are selling, buying, letting or renting, we’re here to help. Call Joe, Patrick or myself and our team on 0161 428 3663 or email: lettings@mauricekilbride.kinsta.cloud for expert advice which is honest, accurate and informative. Better still, why not pop into our office on High Street, Cheadle for a coffee and a chat!

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