Tory MP Kevin Hollinrake – the founder and now chairman of Hunters – has told the Commons that there is an argument for capping fees charged by letting agents.
However, Hollinrake warned against abolishing the fees altogether.
The Government itself has warned that it will keep letting agent fees under review – and may act.
In a debate on the subject in the Commone, Hollinrake said that letting agents’ fees are an issue to be addressed.
He said: “There is clearly not a free market for tenants, who follow property rather than choose between letting agents because of fees, so it is an issue that we need to address.
“However, letting agents rely on these fees for income, and so that income would have to come from somewhere else; it could be added to rent or else come from higher fees for landlords.
“Agents may also choose to take the most secure tenants and prefer those with good credit histories, rather than take a risk on a tenant with an inferior credit history, because of the risk of having to do the work twice, which would add to their costs.
“There is a potential issue there, so should we consider a cap rather than abolition?”
Hollinrake was speaking in an adjournment debate called by Maria Caulfield, Tory MP for Lewes, Sussex, on letting agent fees.
She said these were “an emerging scandal” which had “rocketed over the last two years.”
She told MPs: “To investigate the extent of the problem of lettings agent fees, my local Citizens Advice Bureaux in Seaford and Lewes researched those fees across the constituency. They found that the fees can range from £175 to £922.
“Such fees are in addition to the average six-week rent deposit required – it is rapidly becoming an eight-week rent deposit – and the month’s rent needed in advance.
“Using the rent calculator provided by the charity Shelter, which is available on its website, a new tenant wanting to rent a two-bedroom property in Lewes, where the average rent is £1,200 a month, would need to stump up in advance anything from £3,032 to £3,779, depending on the lettings fees charged.
“Realistically, how many of us could afford that?
“The research from the Citizens Advice Bureaux goes further, and makes fascinating reading.
“They have found that not only do fees vary from £175 to just under £1,000, but that such variations can be found by letting agents on the same high street, with the big national letting agents tending to charge the most, while the small independent agents charge the least.
“Moreover, the type of fees that a letting agent charges varies greatly. Letting agents often charge a holding fee of about £200 to secure a property.”
Caulfield argued that the Government should adopt five proposals:
– Cap letting agent fees.
– Set standards for what can and cannot be charged for.
– End the practice of charging for tenancy renewal, or at least give greater protection to tenants on short-term lets.
– Tougher penalties for not displaying fees.
– Promote this issue so that tenants are aware that there is a difference between the fees that are charged.
However, Under-Secretary at CLG Marcus Jones said: “Since 2014, all letting agents and property managers have been required to belong to one of three Government-approved redress schemes and that since 2015 letting agents and property managers have also been required to display a full tariff of their fees prominently in their offices and on their websites.
“Banning or capping letting agent fees would not make renting any cheaper for tenants.”
He went on: “The evidence from Scotland, where letting agent fees have been banned, strongly suggests a direct relationship between a ban and higher rents.”
Stressing that the Government is committed to reviewing the operation of the policy to make letting agents required to make details of fees publicly available, Jones said: “If we find that the approach is not, in fact, working well, we will consider whether more needs to be done, including looking at the case for taking action on fees.
“The review will be carried out later this year.
“In the meantime, the Government’s position is that a ban or cap on letting agent fees would be disproportionate, probably pushing up rents without benefiting either landlords or tenants.”
Comments (4)
Well done Kevin. A ban of fees would have a very negative effect on the whole market and this includes tenants. Equally, the small number of agents who apparently charge excessive fees are discrediting thousands of hard working professional letting agents who do great work for both landlords and tenants. A cap makes good sense and ARLA, NALS etc. should get behind such a campaign. The answer is to root out the few rogues and for the professionals to demonstrate that self-regulation really can work.
Also following on from above that cost is put into perspective, when you consider that an applicant minimum income has to be around £34,000 Pa so the cost is relatively small and with tenancies being longer on average there is also a saving
Maria Caulfield says that renting a property in Lewes would entail up front costs of between £3,032 and £3,779 and asks “Realistically how many of us could afford that?”
This includes the first month’s rent, so actually the up front costs over-and-above the rent are between £1,800 and £2,500.
Would Ms Caulfield feel confident handing over the keys to her house to someone who was expected to pay £14,400 per year in rent, plus all the usual costs of running a household, but couldn’t raise a couple of grand to pay a refundable deposit plus agent fees?
Looking at it another way, I’ve just bought a house, and the mortgage arrangement fee alone was a couple of grand. Having a place to call home is an expensive business whether you buy or rent.
Quite a balanced view. Good on the man from hunters.
But he should go further. The entire problem is amplified by a bunch of political policy advisors who have no understanding of the industry and are just trying to win votes for their particular monkey.
what about the fees charged by banks on setting uo mortgages. I’m sure it outstrips what estate agents charge for arranging a tenancy.
Can propert eye do some rough calculations maybe?