Ban on Agent fees to Tenants

News at Howland Jones | 20/01/2017

Many of you will already be aware of the Government’s announcement last October about their intention to abolish the fees charged to tenants throughout the rental process.

However, little information has been provided by them as yet in terms of how they intend this to work and when they expect it to come into force.

As usual, the unscrupulous practices of a few “shark” letting agents overcharging prospective tenants whilst effectively in a captive market, have focussed the Government on the level of fees being charged to tenants. If someone wishes to rent a particular property, they must work to the rules of the managing agent, regardless of the charges in order to move into it. To this extent, I fully endorse a review of the industry’s charges and to cap these to make it fairer to the tenant.

However, to charge the tenant no fees at all would undoubtedly bring uncertainty to the letting process with tenants having to make no personal financial commitment at all. What will prevent a prospective tenant from changing their mind at the last minute and cancelling their application? Applicants could apply for a tenancy either knowing they may fail referencing; or they might apply for more than one tenancy at a time without impunity. And who will pay for the referencing and work which has already been carried out by the agent then?

An arbitrary ban of all tenant fees would significantly reduce the income to the letting agent. If this were to happen, agents would quite simply be unable to operate. As David Cox says, “Outside of the industry it's probably fair to say that there is little understanding of what a lettings agent actually does to warrant charging fees to tenants. This is why it's important even now to explain how the costs are accounted for and what tenants are being charged for.” Agents would not be able to deliver the same service and reduce their costs to this level, so the lost income would have to be replenished in other ways. This could be through increased rents across the entire market and potentially increased costs to the landlord.

As members of ARLA, we get to hear first-hand what they are doing to lobby the Government about this important topic. Just yesterday, ARLA Managing Director, David Cox has contacted us with updates on the debate which took place in the House of Lords yesterday morning. During this debate, Baroness Grender (who introduced the Renters’ Rights Bill) asked what steps were being taken to implement the ban on lettings fees. She was advised the Government was committed to introducing this legislation as soon as possible and a consultation is planned for March/April. This consultation will consider the views of property agents, landlords, tenants and other stakeholders and impact assessments will be conducted.

Baroness Grender believes upfront, renewal and exit fees should all be included in the ban. The Minister replying confirmed the consultation will need to be very thorough to ensure the Government “get it right” but agreed with the “general thrust” of what she was saying.

ARLA is preparing its own impact assessment of the ban, based upon its own industry knowledge and the results of a recent member’s survey.

We will be writing to the Government detailing how we believe such a ban would impact not just our own agency, but the private rented sector as a whole.

We would encourage all landlords to lobby their local MP’s as soon as possible. To contact your local MP, please go to Link

Howland Jones will continue to monitor progress in this matter and we will provide further updates as they happen.