In the Autumn Statement the government announced its intention to ban the tenant fees charged by Estate / Letting Agents. What will this mean for tenants, Letting Agents and landlords ?

In 2012 fees charged to tenants by Letting / Estate Agents were banned in Scotland so the announcement for the same to happen in England has been expected for the past couple of years and groups such as Shelter and Generation Rent have been lobbying hard for the ban.  The only surprise was the announcement without warning in the Autumn Statement although the time frame hasn’t been announced yet.

For tenants this will mean not having to find any upfront costs when applying for a property although I would expect more agents to request a ‘Holding Fee’ . This is deducted from the 1st months rent, but shows commitment from the applicants. Should they decide to withdraw without reason then reasonable costs could be deducted before refunding the holding fee. A holding fee could typically be £300 or more depending on the property.

For Letting / Estate Agents there will be a reduction in their income which might result in the need to reduce staff numbers or reconsider increasing the number of staff they have until they have adjusted their costs accordingly. For some Estate Agents who rely heavily on charging tenants for costs such as renewing their tenancy agreements every 6 months although there is no legal requirement to do so and charging the tenants fees of £150+ for doing so, the loss of this income stream might result in them closing the lettings side of their business and concentrating on the sales side only. For many Estate Agents lettings was the side of their business that is secondary to their main business and income stream of sales and the amount of administration and legislation involved was become a headache for them.

Dedicated lettings Agents who are properly resourced, have all their procedures in place and focus on lettings as their only business should be able to adjust and streamline to the changing income stream.

The argument by Shelter and Generation Rent for a ban on administration fees to tenants was that Landlords should pay all the costs and none of it should be shared. Some would argue that the inventory at the start of the tenancy was to protect the tenant and their deposit at the end of the tenancy. Also the amount of chasing for tenant ID, proof of address, bank statements, employment contracts, accountants reports etc to allow them to pass referencing, right to rent checks now required by all adult tenants, follow up viewings, requests to move in at unsocial hours is a cost  that the landlords will have to contribute towards as part of the fee charged to them by the agents.

Show me a landlord willing to pay more fees without expecting to recoup them in other ways especially if they will be losing out on the mortgage interest they can claim back on their income tax bill from next April.

What is this likely to mean for tenants ? Unfortunately we are likely to see increases in rents as landlords look to recover the extra costs. These might be relatively small and we are not talking large increases but if the increase is calculated over 2-3 years it could be the tenants who are worse off in the end. If you are a short term tenant for 6 months then you are likely to have saved on your overall costs. It will also make it easier for tenants to move property if they wish as they will not need to find the upfront admin fees although as mentioned previously I would expect a ‘Holding Fee’ to be requested.

Once the date is announced by the government there will be changes. Rents will increase. In fact since 2012 when fees were banned in Scotland rents have risen 15% whilst in England they have risen between 2% and 11% (London). Some Estate Agents will stop doing lettings. Maybe some Letting Agents will start doing sales to add to their income ? Some agents might reduce the amount of effort they put into viewings if they are not receiving the same income and possibly just take the first applicant instead of choosing the most suitable from a choice of applicants.

This all leads to the question of what should a landlord new or potential be doing ? They need to see how their current agent is responding to the potential changes. Are staff numbers being reduced ? Does the service level begin to fall off as they lose interest in the lettings side of the business ?

There have been a number of legislation changes over the last 18 months such as the requirement for smoke and CO2 alarms ( solid fuel only), Deregulation Act 2015 and the right to issue a Section 21 notice, the new Section 21 & Section 8 notices and the required Right to Rent checks among others. You need to be confident that your agent is up to date on the current legislation and keeping your properties and all their procedures compliant. Look for an agent who you are confident in, has a good local reputation, is a member of the relevant bodies with Client Money Protection and with the changes in administration fees chargeable to tenants will continue to give you the service level they did previously.