As tomorrow’s crucial – and hasty – vote on letting agents’ fees draws closer, the industry is continuing to make its views clear.
But, with the news that Ed Miliband would attempt to force a vote being announced only last Thursday, concern is growing that agents were given so little notice – effectively, just three working days.
There is also concern that a number of letting agents still do not even know about tomorrow’s vote.
At Friday’s ESTA event, for example, it was apparent that non-Eye readers were completely unaware of this challenge to their livelihoods and business models.
As things stand, MPs will be asked to vote on banning fees charged by agents to tenants in an amendment to the Consumer Rights Bill.
The Bill will apply across the whole of the UK, including Scotland where the existing law banning fees to tenants was explicitly tightened up on November 30, 2012.
According to Thomas Ashdown, of Scottish lettings portal Citylets, 10% of letting agents in Edinburgh have disappeared since that date, and he estimates a similar number in Glasgow have gone.
He says rents across Scotland have risen from an average £677 per month to £699. While this rise may be marginal, those with knowledge of the Scottish lettings industry say it is an open secret that agents have found other ways to charge tenants fees.
Meanwhile, lobbying organisation Generation Rent has said that agents charge whatever they think they can get away with – typically £500, according to Miliband.
Alex Hilton, director of the campaign group – who was a Labour candidate for Kensington & Chelsea in the last election and used to be a campaign co-ordinator for the party – said: “Letting agents certainly do provide a service – for landlords. They don’t work for tenants, so they shouldn’t expect to be paid by tenants.
“For a tenant, £500 is a huge amount of money to spend when they’re moving house, but to a landlord bringing in many times that over a year it would be a drop in the ocean – especially as Paragon estimates that the annual return on buy-to-let is 16.3%.
“Moreover, the fees are only that high because that is what letting agents can get away with – printing out a tenancy agreement does not cost £100. In a cut-throat market for houses, tenants can’t shop around based on agent fees.”
But Lucy Morton, former ARLA president and director of lettings at WA Ellis in London, said if upfront fees were banned, they would simply be reassigned elsewhere.
She also said: “Some argue that purchasers are not charged any fees (unless, of course, they retain a finder) yet tenants are.
“What everyone is failing to recognise here is that purchasers instruct solicitors and surveyors: solicitors carry out their legal work while letting agents do the legal work on behalf of both parties and charge far less fees.”
Peter Grant, of software firm VTUK, said: “If prospective tenants have made no financial commitment and are free to apply for as many properties as they want and create administrational processes, then the balance of the transaction is corrupted, leaving the system open to financial abuse by applicants.
“Furthermore, verification is key at the outset of the contract for the protection of both the tenant and the landlord, with the agent delivering a hugely valuable service in ensuring the property is right and proper to be let, that compliance is met, and that the financial transactions are correctly administered.
“Clearly these services need to be paid for, and my belief is that if these were removed from agents and passed on to solicitors in a conveyancing model where both sides cover their own costs, then the tenant would be looking at a tenfold increase in their fees.”
Sarah Rushbrook, of property management firm Rushbrook and Rathbone, said politicians were expecting agents to act more like a charity than a business. “We could see agents cutting administrative corners, with disastrous repercussions,” she warned.
“The private rented sector is not a not-for-profit service.”
Eye has also heard from agents and industry suppliers, including a number who are lobbying their local MPs.
Most of you are giving very similar arguments: Miliband’s move is ill-thought out and could hit tenants through higher monthly rents. Politicians would do better to work towards regulating all letting agents, to raise minimum standards.
Among those who have contacted Eye are: Matthew Dabell, of Aspire, in London, Luke Gidney of LetLeeds, and Sanjay Gandhi, of Moss Properties, in Doncaster and Wakefield.
Please keep your views coming, both directly to us and, very importantly, in the comments section below this story.
We will keep you regularly updated on this important issue, and if there are any developments today, these will be reported promptly on this site.
Comments (22)
Great News, my e-petition has now gone live. Please pass this link of via all media and get everyone to sign it. Thank you
http://epetitions.direct.gov.uk/petitions/64975
If fees were capped at a reasonable rate then I wouldn't argue. But to not have any referencing fees at all would mean tenants could apply for as many properties as they wanted with no loss. For us that would mean more work and more cost. A landlord isn't going to want to pay for every withdrawn application they get on a property. I guess we just have to wait and see how it goes!
The views are counting as 2 on this site making the stories look more popular than what they are, please fix as it does not need this.
Paull – Thanks for the alert. We are looking into it as a matter of urgency as we most certainly do not want to mislead anyone.
Paull – We have checked and the system is correctly recording the number of reads. The read count of this story is comparable with other 'hot' stories in past days and it may just be that on the occasions you watched it there was someone else coming on to the page at exactly the same time. Thanks again for telling us.
Instead of doing away with tennant fees completely why not cap them at say £200-£250?
But then the psuedo agents who don't actually have any properties to let will have to reference twice as many not suitable hopefuls. No fees at all means this breed of parasite will soon disappear
D'oh…..didn't think that one through did I!
Hello Wilko
Don't be too hard on yourself, an entire Civil service department, a whole troop of MPs, all the trade and regulating bodies have failed to think it through.
The shenanigans surrounding this whole debate is the fear of not really understanding what the dickens is going on and not wanting to be caught saying anything the popular voice isn't saying.
It is the failure to properly understand rouging that has led to this very likely permanent legislation. Instead of sitting back and analysing or listening to those who had worked out what was going on there was a clarion call for legislation of the industry. Here is it, here is the legislation everyone was so desperate for. It is a pity that it is not quite what everyone was after.
This legislation will do away with rogues, those who take multiple exaggerated fees on properties that often do not exist or which have already been let but it will damage businesses who have reduced fees to landlords with supplements from tenants. It is difficult to come back from 6% or 7% and so are really going to struggle.
It is my suggestion that you genuinely get behind this legislation, allow it to cleanse the industry and re-establish the Profession that last really existed under the likes of Adrian Turner, Trevor Kent and Co.
It is simply impossible to control competition through legislation Agents have to be service orientated professionals who understand the business side of agency rather than delegating such stuff to others.
What Eric W says above is quite true. And let's not forget: whatever happens tomorrow, this Bill still has to pass through the Lords – and that is the point at which the industry as a whole MUST co-ordinate a robust and united front response to this idiotic proposal. Who works for free ? For us, tenant fees account for around a fifth of income. Abolish them and we will not only not be able to pay the 20% VAT on that lost income to the Chancellor; we will also be laying off a member of staff. So much for thought-through, joined-up Labour 'policy'.
And all this from a party leader who lives in a £2.5m property, who is totally out of touch, fixated with his nonsense 'cost-of-living-crisis' propaganda – and who has never had a proper job in his life. Well done, Labour, Unite and Shelter. Welcome to the madhouse.
I think we need to remember the vote is for a draft amendment at this stage and wont become Law tomorrow. If the amendment is accepted, and opinion is split, we will have plenty of time to lobby if we feel inclined so to do.
I have also been surprised at the lack of publicity over this issue. It seems that after a headline announcement on Labour's website, the subject of tenants fees has been sneaked in under the radar. Just an observation.
I have also noted the stats which demonstrate that when this process was imposed in Scotland, rents went up. I am also advised that many agents in Scotland still charge fees. I am sure this issue has a lot of running left in it before anything changes.
Quite annoying how figures of £500 are bandied about when in reality the majority probably charge a more realistic £125-£250.
This is to reflect the cost and time involved in assisting with the considerable workload of making a tenants move in a smooth and legally compliant transaction.
The landlord as client is only half of the transaction, the tenants involvement means they should be party to the costs, and I can't see how it is unreasonable to ask for them to pay their share.
Most of us are probably operating in an extremely competitive business environment, so comments about Bottom Feeders are childish and dont reflect the reality of most markets. In my large town we have the usual mix of long established local operators, franchises, national chains and small more recent players. I know of none that are out to abuse the position of tenants, they are merely applying costs where appropriate.
Take this away and what will happen? Well there will be more consolidation (as there already has been), this means job losses, less choice for the consumer, and ultimately therefore higher charges.
Show me a landlord that will accept more costs without wanting to recover said costs in rent rises and I will show you a labour minsiter that will take a pay cut on his salary.
Finally, this job,…. career choice,… business,… industry lets be honest its not a career I will be pointing my children towards and there's very little thanks attached. Do my staff and I want to take a pay cut and watch as I lose more control over how I conduct my daily affairs? No thanks! anyone looking to take on a 175 property agency established over 15 years?
Just a quick update. Have have tried to start an e-petition but that won't go live for up to 7 days and the vote take place tomorrow!
A friend of mine is talking on Kent radio station today so will get out the message and I have contacted the main people at ARLA, RICS and of course my local MP.
Please let's get together, all contact our local MP's today and urge them to vote against this unthought out bill going through
and they didn't know that?
If the politicians want to influence this market then surely the best solution is to educate tenants about their rights and the legal responsibilities of an agent & landlord?
The article also states that "£500 is a drop in the ocean" to a landlord and "Paragon estimates that the annual return on buy-to-let is 16.3%". Any mortgage brokers seen this latter statistic? Its ludicrous. The national average that I have read many times elsewhere is 6%, which makes being a landlord a marginal business, and is in line with all the evidence I have seen and of speaking with many landlords.
There is also a big difference between gross and net yield!
As most landlords only have 1 BTL property, they are relying on capital growth. This is financially high risk, so guess what will happen if Milliband gets his way, and then interest rates start to rise (as they inevitably will)?
Presumably MPs will be fed this statistical misinformation before they vote. No wonder Milliband is trying to rush this through before people inform their MPs of the facts about lettings!
Its more vote-dredging, ill-thought out nonsense.
It's interesting to note that all we do is reference a tenant for our money. If that is the case then we will charge the £50 – £60 as suggested and leave the rest to the tenant. Which could leave them to being exposed to skulduggery.
I have been asking this question on other forums but no-one wants to reply for some bizarre reason. The question is what do you pay for the following per day and it is through the books and does not include materials.
1. A Plasterer
2. An Electrician
3. A Plumber
4. A Carpet Fitter
5. A Window Fitter
I have often wondered how a plumber can justify a 'standard' call out fee of say £90 and bill in blocks of time rather than time actually spent on site.
Plasterers are £125-£150/ day plus lots of tea
Electrician £100-£125 plus listen to them moan about their shoulders; all the work is above their head you know
Plumbers- non Gas cert £100-150, Gas cert standard orchestrated charges apply for everything they do.Circa £50/hour
Carpet Fitter FOC its included in the carpet price but £80-110/ day if they are not supplying carpet
Window Fitter as per carpets it is worked into the price.
Thanks Ampersat, just as I thought so why do agents have to charge nothing for their time?
Whose fault is it but the industry's that it has been wrong-footed on this one? I suggested to a leading light in lettings a year ago that this issue needed to be addressed but got no response. When I chased it up I was sent an internal email, "accidentally" perhaps, describing me as a "cheeky sod" for suggesting that more needed to be done and that I would be ready to help! It is now too late to build that essential defence of fees and thanks to apparently passive public representation you are all labelled "greedy sods". Maybe your leadership issue is as dire as your political one. It would once have been easier to close the door on this one but now private sector tenants, who outnumber domestic property owners, are ready to bolt to whoever offers the biggest promise of PRS control in their manifesto. Will the last landlord in Britain please disconnect the electric!
Whose fault you ask? Campbell Robb @ Shelter has been spearheading this campaign for a full 3 years. Any comment or warning that this was going to happen was either ignored in a very ostrich like fashion or self assured mockery of a preposterous suggestion. Pah! it has happened in Scotland but it won’t happen to us was a very typical reaction.
Letting agent today didn’t attract the readership or comment volume of its sister but there was a consistent call to act on this subject and at one point the full campaign team network was discussed. En mass the industry has ignored Alan Ward and the others who have seen this coming and made comment about the need to act; reducing fees to appropriate and justifiable levels.
It really is too late to do anything about, all those condemning rogue agents for the mal practice that has bought about this broad brush legislation will naturally blame roguery but the reality is that anyone who has charged more than £30-50 per tenancy in referencing fees and administration has bought this on them selves. Those offering a good level of service will have no trouble re-establishing traditional fee levels that are un-subsidised by tenant fees. The bottom feeders that are almost wholly reliant on tenant fees instead of successful Letting or Management fees are the ones who will suffer from this legislation so I would suggest professional agents welcome and support this legislation as it is in my opinion the single most effective way of removing rogues from the food chain.
As an industry, can we not start up an on-line petition against this? I have always agreed to regulating agents but to remove the small fees we charge to tenants which are there commitment fees would send us and the majority of agents to the walls.