New measures to provide a fairer deal for renters by banning letting agent fees in England have been set out by the government at the start of an official consultation process.
The government believes that the ban on fees, which has already been done in Scotland, will encourage greater competition in the rental sector, stop hidden charges and end tenants being hit by costly upfront payments that can be difficult to afford.
Housing Minister Gavin Barwell said the move will bring an end to the small minority of agents exploiting their role between renters and landlords, banish unfair charges being imposed and stop those agents that double charge tenants and property owners for the same service.
Proposals also ban any letting agent fees being charged to tenants by landlords and other third parties. Barwell explained that this stops tenants having to pay fees through the back door by other routes.
He believes that the measures will improve competition in the rental market and further drive up standards by placing the onus on landlords to shop around for more competitive fees for services they pay for.
Market research by the Department of Communities and Local Government (DCLG) found that the fee charged by letting agents for setting up ranged from £50 to £420, the fee for reference checks varied from £25 to £240, the fee for a tenancy agreement went from £36 to £300 while the cost of guarantor checks ranged from £25 to £378. It also found that the fee for a tenancy renewal went from £15 to £150 and for a tenancy amendment it went from £24 to £432.
This means that the total potentially paid by a tenant for fees associated with a tenancy ranged from £120 to £747, with the average £318, even although the services provided are broadly similar. The report points out that the majority of tenancies are granted for between six and 12 months initially so many tenants therefore pay letting fees several times over in a relatively short period of time either because they move home and need to pay letting fees for a new tenancy or because of charges arising from renewal or extension of their existing contract.
The research also found that 33% pf landlords were charged additional fees by a letting agent for an inventory which averaged £103, some 29% were charged an average of £202 for tenancy agreements, 17% an average of £142 for check-ins and 16% charged an average of £97 for referencing.
“We’re determined to make all types of housing more affordable and secure for ordinary working people. Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees,” Barwell said.
“Our housing white paper sets out other ways we will help those renting, including building more homes for rent and providing longer, family friendly tenancies,” he added.
He also pointed out that t report from the housing charity Shelter found that nearly one in four people in England and Wales feel that they have been charged unfair fees by a letting agent. Fee levels vary considerably and the charity found that one in seven tenants pay more than £500.
But the lettings industry beleives that the ban will lead to higher rents and according to David Cox, chief executive of the Association of Residential Letting Agents, it will not help the government’s desire to encourage longer term tenancies. He pointed out that an independent analysis launched at ARLA’s annual conference last week revealed that if an outright ban was introduced rents will increase by £103 per year which will only serve to financially punish long term tenants.
“The decision is a short term crowd pleaser and we are disappointed DCLG has not considered our proposals in today’s consultation. We urge the government to use this process to think again to ensure that consumers, and the wider economy are not penalised by contradictory government policies,” he added.
According to Richard Price, executive director of the UK Association of Letting Agents (UKALA) the ban could seriously affect members’ ability to run their businesses. ‘Small agents in this market are drowning in constant policy interventions. The publication of this consultation in isolation, at a time when we’re awaiting further proposals on requirements for all agents to hold client money protection insurance, is proof that this government does not have a clear vision for the future of the sector,’ he said.
Ian Fletcher, director of real estate policy at the British Property Federation (BPF), believes the consultation is a god starting point on how a ban might work in practice. “The government is deeply conscious it wants to avoid unintended consequences of a ban for both agents, landlords and tenants, and it is vital therefore the sector contributes its thoughts,” he said.
“The BPF accepts a ban and many Build to Rent providers already do not charge letting fees, but there will be devil in the detail. We are pleased to see the suggestion that holding deposits will be outside the ban, which is a vital part of a well-functioning student accommodation market. We will want to probe how services that are recharged to tenants, such as broadband provision, will be treated. Overall, however, this is a very welcome call for evidence,” he added.
The consultation will last for eight weeks from 07 April 2017 to 02 June 2017 and an impact assessment will be completed following the consultation. People and organisations can give their views online, by email and by post.
The consultation paper says that the ban also recognises that landlords are being hit with dubious fees and a ban will create a more transparent market place so landlords can easily shop around for an agent to provide the quality of service they want at a price they are willing to pay.
It says this will avoid double charging and result in a better and more transparent service as whilst most letting and managing agents provide a decent service, there are those that offer a poor service and engage in unacceptable practices.
A ban, it adds, will mean tenants will be able at a glance to see what a given property will cost them in the advertised rent level without any additional hidden costs and this should help to make entering and moving around in the private rented sector easier and less costly.