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Tenant admin fees - Are they justified?

Looking in more detail at the possible impact of Labour's plans to abolish Lettings Agency fees to tenants.

On Tuesday 13th May, Ed Miliband and Labour will table a bill to stop Lettings Agents from charging tenants fees for renting property in a bid to provide a fairer deal for tenants.

I can't disagree with the sentiment and I've always had a bit of an issue with tenant fees because after all, the Landlord is my customer so my charges should be paid by him and not the tenant.

What happens now?

At Belvoir Enfield we charge a small upfront admin fee. It is deliberately kept low and it's the only tenant fee that we charge throughout the tenancy, no matter how long the tenant stays in the property.

I know from personal experience that not charging this fee before referencing can leave you out of pocket when a tenant changes their mind or fails the checks.

Admin fees vary from agency to agency and some do seem very high.There are also agencies who charge tenants fees for other services such as check-in, inventory, deposit registration, check-out and tenancy renewal, all of which can all get expensive.

It's unclear whether these additional charges are included in the Labour bill. However, the upfront Tenant Admin Fee, definitely is.

So if Labour are successful, how will I make sure that I don't lose money a tenant with no financial risk to himself, potentially puts in offers on several properties at the same time, either to hedge his bets or, worst case, in the hope that at least one agent won't reference thoroughly and find out something he wants to hide?

Pass the Admin Fee to the Landlord?

There has been the suggestion that these fees will be passed on to the Landlord instead. And maybe where the admin fees is relatively small that will not cause too much concern but bearing in mind that Landlords in the borough of Enfield are also just about to start paying license fees then I see one of three things happening here:

- Rent Increases. Landlords may put up their rents to cover both admin and licence fees. Does this have any benefit for the tenant?

- Self Management. Landlords may choose to do-it-themselves rather than use agents. Most Landlords who use agents do so because they don't have the time or experience to self-manage. Electing to do so now could mean falling foul of increasing regulations due to licencing, leading to potentially bigger costs in the form of fines. Is this the best situation for the tenant?

- Focus on cost. Landlords could look for the cheapest agent. This is so often a false economy particularly with the fines that can be incurred as a result of non-compliance with the licencing conditions. Again, is it the best thing for the tenant?

So what is the answer?

Last year the Advertising Standards Authority ruled that agencies have to advertise all non-optional Tenant Fees and to identify and provide information on any optional costs that can not be easily quantified.

Tenants and Landlords can and should use this information when selecting which agencies to work with.

As I said at the beginning I completely understand the sentiment behind this proposal and Belvoir is completely in support of a review of the private rental sector, however in this instance the proposal will not have the desired positive outcome for tenants.

 

 

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