The second reading of the Tenant Fees Bill is due to be heard on Monday – and ARLA Propertymark has attempted to rally all its members to lobby their MPs.
In a prepared briefing issued yesterday and to be used by member agents, MPs are being told that jobs will be lost in the lettings sector and that the services provided by letting agents will be reduced.
The briefing also says that a ban will not make the market fairer for tenants or make the sector more competitive, as some agents will be driven out of business – thus providing less choice.
The briefing says that a ban will result in those agents that remain being more choosy about tenants.
According to ARLA, 90% of agents think that a ban will result in higher rents. The paper suggests that rents will rise £103 a year on average, as a direct result.
Comments (9)
With the fee ban in Wales now also expected, here’s a letter we’ll be sending to local MPs and AMs. Feel free to take any useful phrases, paragraphs to insert into your own letters (if you think they’re any good..) :-
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PROPOSED TENANT FEES BAN
We are an established firm of sales and letting agents, members of ARLA and RICS. We would like to make the following points on the proposal to ban all Tenant Fees :-
Tenant fees represent around 15 – 20% of a typical agent’s income. In a highly competitive market it is unlikely that landlords will accept much in the way of fee increases so there must inevitably be job losses in agent’s offices. Young people, recently trained to Rent Smart Wales standards (at some expense) will have their career ambitions thwarted. In an already difficult post-Brexit sales market some mixed service agents will not survive.
There will be a power shift towards landlords and away from the tenant. Tenants will no longer be clients at any point in the process; the landlord will be our sole client throughout. As conscientious agents, we will probably continue to exceed basic duty of care and represent the tenant’s interests as far as we can – to act as a buffer between landlord and tenant when things get difficult, but many agents will no longer regard this as any sort of priority and they will default to doing what the landlord wants, every time.
We process around 200 applications per year in our office. We cannot recall the last time a prospective tenant complained about our fees. They seem to understand the process and that there is a reasonable charge for the service. It’s not a simple credit check, we look at their employment situation, their ability to make payments, their general situation. We also undertake much other work such as check-in, inventory, tenancy agreement, deposit etc where both landlord and tenant each have an interest and where the cost should be shared.
When someone applies for a mortgage they undergo thorough checks to ensure that they will be able to meet the monthly payments. An application fee is paid to cover the work involved. Monthly rent payments can be very similar to mortgage payments, and it is right that care is taken to verify the applicant’s ability to meet the financial commitment involved. It is reasonable that the applicant should pay for this service.
In Wales we have had to pay out a significant sum (measured in thousands) plus other costs in order to become a ‘licensed agent’ under the Rent Smart Wales scheme. Whilst we support the aims of the scheme as a tool for improving standards in the lettings industry, we would have to say that as ARLA members of long standing, none of our tenants or landlords will have noticed any difference in the standard of service we provide or the professionalism with which we carry it out, simply because we are now licensed by RSW.
Good Welsh agents have been instrumental in ensuring the Scheme has got off to a good start, getting all their landlords to register, providing advice across the board and generally promoting the Scheme.
There has been little mention of the enormous contribution agents have made; and now the government wishes to take away a significant proportion of our income by banning tenant fees. So much for goodwill.
At our agency and many others that we know, we will always strive to be the best.
But with a wholesale ban on tenant fees, agents on a reduced income will find this approach increasingly difficult to maintain. If the government is looking to improve management standards, an outright ban like this is NOT the way to do it.
That said, we are aware that some of our competitors, notably the larger corporates, are charging fees that we would be uncomfortable with. For that reason we would support a sensible cap on fees, pitched at a level that is affordable for the tenant but which does not destroy businesses.
Please also find enclosed an ARLA briefing note. Thank you for your consideration.
Perfect. Well worded, clearly thought out and concise. Hopefully this will make a difference for you guys!
In my view ARLA is seeking to defend the indefensible. An agent’s client is the landlord and there’s no contractual relationship between agent and tenant. Deriving income from tenants opens up potential for conflict of interest. Tenant fees were made unlawful in Scotland in 1988, a position which was reinforced by the Scottish government after fresh consideration of the matter a few years ago, and the bottom hasn’t fallen out of our world.
The market, not agents or landlords, dictates rent levels for new tenancies and is the ultimate measure of rental value. It’s easier to increase sitting tenant rents in order to justify a fee increase to landlords, but if there’s no reliable market evidence to justify this it’s unethical and wrong.
What the ban will do is professionalise the sector by eliminating the practice of chasing business with low landlord fees subsidised by tenant-derived income, and we all know that low fees attract the marginal landlords reluctant to fulfill their obligations.
Responsible agents should decline to accept instructions from such landlords.
If agents, and ARLA Propertymark, concentrate on high service standards the fees will look after themselves.
You are correct, the market will dictate rent levels and when PRS landlords have run for the hills and there’s an even bigger housing shortage, guess what will happen to the market and rent levels!
I agree with most of what you have put; the Agents who charge Landlords pennies and Tenants an eye-watering amount will (hopefully) vanish. I am expecting, and hoping, for Landlords affiliated with such Agents to start looking for a new Agent. I plan to be a bit picky however, I believe that a ‘tight’ Landlord creates more work in the short and long term. If a Landlord has no interest in keeping a property in good condition, then neither will a tenant, and you will spend all your time chasing minor maintenance work and dealing with tenants upset that their boiler only gives warm water and that the windows might as well be made of cardboard for all the good they do.
I don’t agree that the right to charge a reasonable fee to do referencing and credit checks is indefensible however, and a contribution towards an Inventory is best as it covers both parties, making it theoretically more fair and less biased than if it is just paid for by one side. That is why I really hoped we would have a fee cap, rather than a ban.
A cap would have been fair to everyone, a Ban just punishes those of us who have not been raking in thousands of pounds a month from Tenants.
Interestingly I keep asking the same question but never have received a reply! Why can lenders require £1,000+++ for booking fees to obtain a mortgage where they make a profit on the loan also? The Government seem to say this is fine but why?
It will increase rents. Simple. Tenants will pay more.
It’s up to 15 hours work, LA’s can’t do that for free.
It’s he end for shorter than 6 month stays where tenants require only a few months.
A fee ban is wrong for the majority. Use existing law to penalise or control the few bad agents.
Ban in London and Manchester only.
Do a trial to determine if it works. Jobs will go. Tax revenue paid by agent’s will fall.
Cap fees to maximum equivalent of one week’s rent.
Ban renewal fees where no change to tenant and address even if rent has increased.
Ban any fees charged by ticket sellers over ticket price. Ban vets, doctors, accountants and travel companies from charging
for any ticket change, contract or letter issue or disbursement fees on their invoices.
We’ve just had a discusion in our office. With all the new legislation against the private rental sector, will we see a future where British Landlords buy in Spain (For example) with British tenants in residence in receipt of housing benefit?
Costa Del Renters…
Rent will rise £103 a year on average?
So lets say a couple are applying for a property but the agent can’t charge application fees. On average that’s £180.00 the agent will need to pass to the Landlord, plus any other lost revenue.
The agent doesn’t want to lose the Landlord so it’s unlikely they will hit them with these costs upfront. Maybe the Landlord’s 8% fully managed deal now becomes 10%…. But 10% of what? He/She will want reimbursing for the sudden increase!
The rent was £550.00 PCM, but with all the meddling and increased costs and the fact that the Landlord can’t offset repair or mortgage costs, won’t he need a contingency fund too?
Let’s put the rent up to say £600 PCM, tenants will pay it! Where else will they live?
Suddenly, the Landlord is better off to the tune of around £600.00 PA and the agents commission has risen around £192.00 PA
That’s the fee covered more or less, but what about the poor tenants?
Their outgoings are suddenly £540.00 more than they would of been, if they’d only been allowed to pay the initial £180.00 application fee.
On average!