Agents have voiced their anger and frustration at Labour’s plans to force a Commons vote through next Tuesday on banning letting fees to tenants – and made clear their determination to fight every inch of the way.
The large majority of letting agents believe the move is profoundly anti-tenant.
They believe that a ban on tenant fees – which could be implemented before the next General Election – would simply result in having to charge landlords more, while landlords in turn would pass costs on to tenants in the form of raised rents.
Yet few agents seem totally opposed to the idea of change, with a number saying they would welcome some regulation – rather than abolition – of fees.
If you missed it, you can see how Eye yesterday afternoon reported news of the impending Commons vote in a story below on this news page.
Agents who are concerned are urged to act immediately:
WRITE to your MP expressing your concern about the impact on tenants.
ASK for an immediate appointment to see your MP: all of them are likely to be in their constituencies this weekend ahead of this month’s local and European elections.
CONTACT your local newspaper to brief them.
VOICE your comments online: our comments section below is for you, so do please use it. You can also add your comments to yesterday’s story.
USE SOCIAL NETWORKING – tweet comments out with links to this story and to comments on your own websites.
TELL US – let Eye know what you are doing in the way of lobbying and we will publicise it.
Agents are also advised that in parliamentary terms, even if the vote next Tuesday is to ban fees, this will not be the end of the matter and there will need to be sustained pressure.
The Bill will still need a third reading in the Commons, before passing to the House of Lords.
Here are some of the comments we have received so far – please do add your own to make your voice heard:
Christopher Hamer, The Property Ombudsman: “There are certain costs that have to be incurred in setting up a tenancy and these will have to be borne by either tenant or landlord.
“If the landlord pays, it is inevitable that the cost will be rolled up into the rent and so is hidden from view. Better in my view that full disclosure of non-optional fees chargeable to a tenant applies. That is in accordance with the ASA ruling and makes the actual cost to the tenant transparent.
“Some research has suggested that landlords would not add the cost to the rent but seek out a cheaper agent. I have said previously that selecting an agent purely on price is a risk.”
Isobel Thomson, chief executive of the National Approved Letting Scheme: “NALS is very concerned about Labour’s call for a vote on the abolition of agents’ fees.
“It’s clear that at present there is a basic lack of understanding about how – and why – letting agents charge fees with an assumption that these charges are unfair.
“Anyone working within the industry on the other hand will know that time and manpower goes into tasks such as drawing up inventories, checking references and administration.
“These practices, when done properly, are valuable for all parties and the commercial reality is that they simply cannot be done for free. If all of the costs are transferred to the landlord this will ultimately mean that rents go up. We would encourage Labour to focus their attentions on making it a mandatory requirement for agents to be part of a Client Money Protection scheme.”
Andrew Bulmer, UK residential director, RICS: “There needs to be given careful consideration to any impact that this proposal may have on the property market, as it may lead to increased rents being passed onto consumers and result in landlords exiting the market, thereby potentially further limiting the supply of properties on the market.
“It’s vital that there is absolute clarity around consumer costs, with reasonably priced, upfront fees explained fully. However, fees from this type of work are important to chartered surveyors, particularly the smaller, independent, letting agencies which are already bearing the cost of regulations.”
Paul Smith, CEO of haart: “Tenants receive a very good service, mostly to protect them and their interests, both physical and financial, and to ensure they have security of tenancy. That service comes at a real cost to agents and if we are unable to charge, there is a real danger agents will cut corners and reduce the quality of administration – the exact oppose of what we believe is right.
“Tenants deserve to be protected but have to understand it comes at a small cost.
“If the tenant doesn’t pay, it will become part of the monthly rent if the costs are transferred to the landlord.”
Eric Walker, managing director of Northwood: “Immediately pulling a source of income from agents could have a profound effect.
“Agents’ business models are structured in a specific way and few agents make big profits, particularly the small independents.
“Many will have to find this lost revenue elsewhere and in many cases landlords will pay more, which will increase rents the tenants pay as it did in Scotland.
“Other agents will have to make savings elsewhere. What is needed is total transparency of all fees, giving consumers a choice, and policing and prosecution of agents who ignore these rules.
“Unnecessary state controls in what is an immensely competitive market benefit no one long term.
“Equally, we encourage the regulation of letting agents, and other constructive policies to eliminate rogue practice. But outlawing letting fees is another blunt instrument – which we suspect would only make rents rise more quickly in the immediate aftermath.”
Brendan Coxx, the managing director of Waterfords, said: “Scrapping fees will have little effect on supporting tenants.
“To make providing a lettings service commercially viable, agents have to charge a fee to cover their business costs, just as any other service-providing organisation does. If we are no longer able to do this, agents will be forced to raise landlord fees, which will effectively be passed on to tenants via rent increases.
“The only difference being, the cost would be spread over the term of a tenancy, rather than an upfront fee.
“Coupled with Labour’s proposals to put a cap on rent rises, such changes could have a devastating effect on the market.
“Landlords, like any other business, let properties to make a profit, but they too have their own costs to foot such as mortgage, bills, maintenance, etc.
“If this is no longer profitable, many will be discouraged from letting properties altogether, which will diminish rental supply even further, giving tenants even less choice and at higher rents.”
Comments (16)
I run a small lettings company from home and have done for the last three years after setting up on my own after over decade in the industry These proposals are totally absurd and I have no idea how any logical thought has been put into this idea. Agents make a lot of their revenue from tenants, they simply will not be able to just loose this money, it will have to be made up elsewhere, i.e. the landlords. Hence landlords of course will have to increase rents to cover this cost. Therefore this "solution" does nothing to solve the so called problems Labour are trying to address, it actually could most likely have the complete reverse affect and actually end up costing tenants more, thus sending the cost of living even higher. To say there are no fees in buying a property is also incorrect, off course there are fees in the way of solicitors costs, mortgage surveys and arrangement fees etc, some of these costs are paying for the time it takes to do these works. Exactly the same as tenants costs, paying for the time it takes to compile the vast amount of paperwork that goes into finding, vetting and then moving a tenant into a property. As much as I love my job to think that I would work for free is just bizarre, why should I, why should anyone? Also forget the working for free bit, what about the actual fees I have to pay to credit check tenants? I guess I will be paying for these too? So not just working for free but actually paying out of my own pocket to work? To think that agents will not add these fees on somewhere else is simply stupid, small agents like me would have to recoup this money somewhere else I simply couldn't afford to trade. I could rant on and on, I am just hoping that some sense will prevail in the end.
I've been in lettings for 40 years and can honestly say, Tenant fees are an absolute must and are vital to our Agency income. There are genuine set up costs bourne on behalf of the Tenant, which must be met. However I have heard of Agents that charge unbelievable fees to Tenants and to Landlords. These Agents are unscrupulous, these are either the corporate Agencies or those that aren't regulated, and we smaller independent Agents seem to be the ones getting penalised for those that over charge or do as they please. What the industry needs is compulsory regulation for all Agents, backed up and policed by the NAEA. The NAEA should set fair boundaries on fees for tenants and landlords, and then T's & L's would have an avenue of redress if they felt that they were being over charged. Of course all Agents should print / display their charges upfront. We are fed up with bad Agents costing us good Agents a fortune in new regulations like 'The Tenancy Deposit Scheme' . So PLEASE regulate all Agents and let the NAEA do its job!!!
I spoke to the PM today (he's my member of parliament) and he has had lots of comments from letting agents in his constituency. He asked me to write down my own comments about the fees and more importantly suggestions for improving the lettings industry. He said all agents should write to their own MPs about the campaign and their ideas for improving things. This pushes up the importance of the issue.
Only someone who is not in business would come up with this idea. I this i……..t
is so keen on not charging fee's is he going to drop the monthly charge to be a member of the labour party or is it one rule for him and another for us
To Steve Baillie from north of the border (and as far as I am concerned I wish you independence asap) – an important point: from what I understood in the run-up to the ban, behind the banning of tenant fees in Scotland is the fact that they had been outlawed decades earlier but the law was flouted by agents without ever being enforced. All that's happened is that the legal restrictions have now been tightened up. South of the border we never had such a law. Oh, and a little bird tells me that some Scottish agents are (illegally of course) re-introducing tenant fees……
Can we tax Milliband for all the CR*P things that he says. Guy would be broke. Hitting property is hardly a way for labour to gain blue votes
Its a double edged sword. Agents need rightly to be able to charge to do a job properly to protect clients and tenants. So to take funds away that cover costs is wrong.
But more main portals are allowing budget marketeers in to advertise private landlords rentals at no or low cost in return for the referencing fees.
So rule out tenant fee taking and it would get rid of many of the idiot cheap models that allow private landlords ads to sit next to agents portal ads. As such agents could charge better ongoing fees. The flip side is that agents do need to be able to charge for works done.
Labour’s view that buyers aren’t charged agent fees when they buy a house, so tenants should not pay fees to lettings agents when they want to rent a new home is vastly over simplified. It misses the point and demonstrates Ed Milibands ignorance of the workings of the market he is trying to change.
A sales fee is just that, a fee for marketing a property, introducing a buyer and brokering a deal. Thereafter the buyer introduces their own advisors so to say that buyers pay nothing is incorrect – buyers pay their own surveyors fees, valuation fees, mortgage fees, solicitor’s fees and finally stamp duty.
Letting Agents in contrast not only market a property, introduce tenants and broker deals but they also verify the suitability of the applicant, implement and administer the legal infrastructure, draw up a detailed inventory and schedule of condition and register the deposit. No third party specialists are introduced by either side and while the landlord is ostensibly the client a Letting Agent has a clear duty of care to the tenant and the work involved in ensuring that the tenancy is set up and run correctly, the deposit registered correctly and client funds are protected is as much in the interests of the tenant as the landlord. It is wholly reasonable that this cost should be shared.
Regarding the proposal to introduce minimum three year tenancy agreements – the majority of investment landlords would love this but our 30 year experience of negotiating and setting up tenancies is that there is little demand for this from the tenant’s side – the tenants appreciate their flexibility and few are willing to commit beyond 12 month. Furthermore, much of the stock in the Private Rental Sector comes from property owners who are in transit themselves. They are part of our increasingly mobile population who may be relocating for work or personal reasons who can’t or don’t want to sell. They make their properties available to rent for 12 or 24 months while they become tenants themselves before finalising their housing needs.
Both the banning of fees to tenants and the introduction of compulsory three year tenancies are knee jerk, attention grabbing policies that will damage the Private Rental Sector, reduce the funding that is available to investors, reduce the stock available to tenants, drive up landlord fees and drive up rents.
Introduce legislation to drive out rogue landlords and rogue letting agents by all means. Professional, regulated Agents and their respective regulatory bodies have been campaigning for this for years but Ed Milibands proposals will severely damage a Private Rental Sector that is working better than ever before in the UK providing the population with options, flexibility and a genuine alternative to home ownership.
If these proposal go through, is there anything to prevent the first months rent being increased to cover the agents costs? This would circumvent any pre-tenancy 'fees'. I guess as ever, the devil will be in the detail. Whatever, the opposition is after cheap votes.
Are they actually suggesting we cant charge tenants reference fees when we have to pay a referencing company to carry out checks? This would lead to agents cutting corners and more fraudulent tenants getting round the system.
They clearly don't understand the huge overheads an agency incurs nor the number of tenants that waste our time at no expense to them. You'd end up asking landlords for money up front which is just ridiculous.
Before accepting any upfront non-negotiable administration fee from an applicant we stress to them that they must be confident of passing referencing otherwise there is a real danger of them forfeiting their hard earned cash. Who will pay for all of the overheads associated with referencing a tenant (just one small part of the whole application process), when we do not have this safety net to prevent applicants from withholding material facts? In the same vein what is to stop prospective tenants from spreading their bets and applying for several properties at the same time; after all it won't cost them a penny, so they might as well try their luck and see how they get on…………somebody will have to pick up the bill for these pre-tenancy checks. Who within the Labour party has gone to the trouble of discussing this with our profession? If somebody could provide me with their name and contact details I should very much like to speak with them.
Excellent comment. Especially the ability of a tenant to apply for several properties at no cost to them, resulting in disappointment and costs for the abortive applications. Maybe this should be applied to mortgages, what is the difference in expecting a tenant to pay or a mortgage applicant paying a fee?
The costs will be passed on in higher rents, which will be more expensive for tenants. A landlord will have to charge a high enough rent to budget for a change of tenancy every six months, which must be more expensive for a tenant who stays for a year or more, resulting in higher rental costs for most tenants.
Who in the Labour party is responsible for having failed to consider the implications of this idea? Milliband should change his advisers on this one, or is he just relishing the publicity knowing it will never happen?
Sorry to not give a hoot about this ban on Fee's.
It's just that we operate in Scotland which has already had the ban imposed.
I would say to all of you "get used to it".
That's not to say I agree with it, on the contrary, it makes my bleeding blood boil. Who should ever ask anyone to work for free? That in effect is what this legislation is outlining.
Fee's are a necessity when you consider all of the time and resources that goes into setting up even one tenancy: Travel, Time, Floorplans, Referencing, Vetting, Drawing up Tenant Specific Agreements, Inventory's, EPC's, Instructions etc.
Just as we up here were a test ground for the Poll Tax (Oh – and have you seen the proposals for Scotland to test out the new Stamp Duty next year!) the abolition of Agents Fee's was implemented here many, many months ago.
Funny how you guys are all interested in it now that it is going to affect you!
Independance?
It "canny" come quick enough as far as I am concerned -maybe then we can have a fair and equitable system for Agent Fee's that works for everyone.
Thanks to Ros for jumping on this so quickly as without her, many agents would not have known and would not at least have the opportunity to voice their opinion.
This non sensical proposal will also lead to mass job losses within the industry as firms would have to operate with much less operating cost bases. Landlords take all the risks and tenants get all the benefits equals to Labour Party madness.
Had the local Labour candidate call on me last night and I told him how I thought Millibands proposed changes would adversely affect the PRS. Trouble was he didn't seem to know much about the proposals but, hopefully, he took my concerns on board.