This website uses essential cookies without which it will not work, along with other harmless cookies aimed at improving your use of our website.

Please see our Web Policy and our Privacy Policy to find out more about the cookies we use and how they can be deleted.

knowledge header image

legal alert: Agency Fees – Soon to be a thing of the past?

12 Jul 2017

A commitment by the Conservative Government in its 2016 Autumn Statement to ban letting agent fees appears to be moving ahead following the Queen’s Speech on 21st June in the form of a draft Tenants’ Fees Bill to  be published this year.

The stated intention is “to tackle unfair fees on tenant and make the private rental market more affordable and competitive”.

On July 10 the Housing Minister, Alok Sharma, commented that the draft bill would seek to enable prospective tenants to search around for properties that suit their budget with no hidden costs and that this would be preferable to tenants being hit with upfront charges that can be difficult for them to afford.

Figures from Shelter suggest that, along with rent in advance and a deposit, average upfront costs faced by tenants using a letting agency are more than £1,000 nationally and over £2,000 in London with letting agent fees making up anywhere from £200 to upwards of £500 pounds of that total.

Tenants currently have limited power to shop around and there is little incentive for letting agents to provide a cheaper or more efficient service for landlord clients. 

However, whilst the Bill is politically attractive and may have cross-party support in Parliament; the proposals are not without criticism.

Opinium, which conducted the research on behalf of the Association of Residential Letting Agents (“Arla”), predicts that in certain circumstances rental costs may rise for tenants as the letting fees reflect actual work done and suggests the costs will need to be recovered through increasing rent and a partial loss of revenue for landlords. That view is supported by anecdotal evidence from landlords some of whom have felt the squeeze from recent tax changes. 

Arla’s estimates are that a ban could cost landlords £300m. Capital Economic, which also conducted research, believes rents could increase by £103 p/a leaving no real significant saving for tenants. 

In some cases, it is believed that tenants would actually be worse off following a ban.  Further, to absorb a loss of agency fees, it is argued that 4000 jobs in the sector could be at risk.

The Bill is due to be published later this year will seek to follow the example set in Scotland where letting agent fees are already banned. It is expected that it will also give tenants the right to recover unlawful fees.  Watch this space for further updates.

If you would like any support in relation to the above, or any other property matter please contact Julie Farrell-Knowles on 0345 901 2065 or at julie.farrell-knowles@watsonburton.com

 

Contacts


Julie Farrell-Knowles | Partner

Email:
julie.farrell-knowles@watsonburton.com
Tel:
0345 901 2065