Transparency requirements around letting agent fees have not worked, ARLA Propertymark has said.
In its official response to the consultation on the banning of letting agent fees paid by tenants, the membership body says that there has been “almost no enforcement” of the rule that letting agents must display their fees.
ARLA said it has been admitted that Trading Standards have “higher” enforcement priorities and do have not have budgets to go after letting agents.
In its response, issued yesterday, ARLA makes clear that it does not support the fees ban, and that fees represent “legitimate costs to business that need to be covered”.
However, ARLA admits that “banning letting fees is the will of the Government”.
Its response likens tenants’ costs to costs of buyers, claiming that referencing checks equate to mortgage application fees; that contract negotiation charges are akin to conveyancing; and inventory costs are similar to a survey.
ARLA also says in its response that the letting agent “acts in a quasi-legal capacity” when undertaking tasks on behalf of the tenant.
The ARLA response says that the body supports the consultation’s proposals that a refundable ‘holding deposit’ can still be taken while reference checks are undertaken.
It says that without this, “the result would likely be chaos in the market as tenants make offers on multiple properties and then choose which property to take after significant work has already been undertaken by letting agents”.
The response calls for any ban to make clear the difference between a holding deposit, and a tenant’s deposit at the start of a tenancy.
The response also refers to deposit replacement insurance schemes, saying these are so new that if a large number of claims emerge, insurers could lose their appetite for such policies.
The response warns that most agents – 87% – think that rents will rise as a result of the fees ban.
The response quotes an analysis of the ban, indicating that agents will lose £200m in turnover, landlords will lose £300m in income, and tenants will pay an extra £103 in rent a year.
The response concludes that in order that it represented the views of not only ARLA members but the industry at large, it sought wider opinions via trade publications EYE and Letting Agent Today.
The result was that over 700 letting agents’ views have now been incorporated.
The response is here
Comments (6)
You make an excellent point here. We know what the Conservatives think as the mention of the tenant fee ban was in the same sentence as ‘loan sharks’. Disgraceful.
We are very much focused on acquisitions and have been approached by dozens of businesses in the same or far worse position. It seems most generate around 20% of their income from tenant fees (some much more) and few make over 15% in profit. It’s a huge concern. These are often small professional agents who provide an excellent local service and look after tenants interests. It’s very sad. To survive, they will have to cut staff, cut corners or sell.
I dealt with one agent who was so upset about the need to sell his excellent ’boutique’ business, we helped him find a way forward. What worries me more is that there are people running good firms who could, no, will be in serious trouble. Homes at risk, school fees unaffordable etc. As such, I hope Government will consider the effect of some so desperate, client accounts become a temptation.
Most agents with deposit holes have borrowed with the absolute intention of repaying the money as soon as possible. Sadly, it rarely ends well.
We still don’t know when the ban will be introduced, so NOW is the time to do what you have done, know your numbers and work on a solution.
Just had end of year accounts for my small letting business and I have a 30% profit margin. 32% of my turnover came from the ‘whopping’ £150 we charge tenants to move house. I wonder if there is a guide to applying for charitable status that the government my give to small letting agency owners.
I know, right? What is it, maybe a maximum of two?
Being honest, most agents just get the tenant to fill out link provided for by the referencing company and await the Yes or No
yes, some of the more diligent agents who dont use a refeencing may spend a couple of hours max but they are few and far between IMHO
as for right to rent, that is something agents would have being doing previously in most cases i.e. taking a photocipy of the passport for ID purposes. To say any different, is a total fabrication on ARLAs behalf
As I have said all along, have a look at the worst culprits in terms of the excessive fees, and most are ARLA agents i.e. romans, foxtons, leaders, townends, hamptons
I know that several of the National Letting agent chains are still charging Landlords secret commissions on contractors invoices too which is unlawful generally & also in breach of the Consumer Rights Act 2015.
Contractor invoices Landlord via the LA eg £100 & LA pays contractor £85 & keeps £15 for themselves. Landlord thinks the job has cost £100 as he has an invoice for that amount.
Multiplied by 60,000 properties this is a nice secret illegal earner for the LA.
“8 hours to complete referencing and conduct right to rent checks” (even using a referencing company)
sadly, that is why I don’t believe ARLA