Letting agents in England will be banned from charging fees to tenants under plans announced by the chancellor in his Autumn Statement, designed to shift the costs to landlords.
Tenants can currently be charged fees for a range of administration, including reference, credit and immigration checks, as well as the drawing up of tenancy agreements, with fees varying widely.
According to the charity Citizens Advice the fees cost an average of £337 per person, but the proposed change could encourage landlords to shop around for the cheapest agent, in order to avoid having to increase rents.
“The announcement by the Rt Hon Philip Hammond MP to abolish letting fees is a welcomed decision. By removing these costs, a fairer playing field will be created for the UK’s 4.3 million private renters,” said easyProperty's CEO Rob Ellice.
“Any sensible agency won’t pass on the charges to landlords, due to competition in the sector, so we don't foresee rent rises as there is no need to add the fees to rents,” he added.
But David Cox, the managing director of the Association of Residential Letting Agents, said it was “fair and reasonable” to charge tenants for administrative tasks.
“A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market,” he said.
The new chancellor is clearly aware of the pressures facing those living in the private-rented sector, but Richard Lambert, chief executive officer at the National Landlords Association, says that in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.
He commented: “There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long. Banning letting agent fees will be welcomed by private tenants, at least in the short-term, because they won’t realise that it will boomerang back on them.
“Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent. But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents”.
Richard Price, executive director at the UK Association of Letting Agents (UKALA), believes that abitrary bans sound appealing as a quick fix, but the problem of affordability in the private rented cannot be addressed by preventing legitimate businesses from charging for their services.
He said: “A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.
“UKALA agents strive to provide a premium service which represents excellent value for money and this ban will place in jeopardy hundreds of professional businesses in order to deal with the few unscrupulous.”
While the ban on lettings fees still requires a government consultation before it is implemented, its impact on the UK housing market could be far reaching, according to Nick Leeming, chairman at Jackson-Stops & Staff.
He commented: “Affordability issues which surround purchasing homes means that for many, the only option is to rent. We’ve seen a consistent reduction in the number of landlords buying investment properties since April this year which means that fewer rental properties are now coming on to the market to serve the growing rental population.
“A better solution would have been to create a more competitive fee environment and ensuring that landlords are not further discouraged from the market.”
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