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Ban on letting agency fees could increase landlord burden

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Last Updated: 03/12/2016  
Author: Jakub Orna, Reliable Homes    Tags:

Letting agents in England will no longer be able to charge tenants fees for administrative processes such as reference, credit and immigration checks under plans announced in the Autumn Statement 2016 by the Chancellor of the Exchequer, Philip Hammond.

As part of Mr Hammond’s latest plans to help those “just about managing” in England, the banning of letting fees could save hundreds of pounds a year for up to 4.3 million households across the country.

The move will put England in line with Scotland, where lettings agency fees to tenants have already been banned. Hammond’s announcement did not apply to Wales or Northern Ireland.

But what does it mean for landlords? The move could encourage competition for landlords who will be forced to shop around for the cheapest agents, because it is speculated that the agents will instead pass the charge on to the landlords.

“We have seen these fees spiral, often to hundreds of pounds,” said Hammond.

“This is wrong. Landlords appoint letting agents and landlords should meet their fees.”

However, there is a feeling that extra costs faced by landlords could result in them charging higher rents to their tenants; sending tenants back to square one.

Alternatively, some letting agencies may choose to absorb part of the administrative costs themselves to remain competitive to both landlords and tenants.

Richard Lambert, Chief Executive of the National Landlords Association (NLA), said: “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.”

Some landlord groups have suggested fees such as reference checks should not be passed on to landlords as they prevent dishonest applications. Instead, the NLA believes more transparency is necessary for charges, rather than a blanket ban on tenant fees.

David Cox, Managing Director of the Association of Residential Letting Agents, said: “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.

“It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder.”

But Shelter said that in Scotland, rental prices have not increased dramatically, citing that analysis of Office for National Statistics (ONS) figures showed private rents in Scotland have actually increased at a slower pace than those in England in recent years.