Recently a vote in the House of Commons narrowly defeated a late amendment, sought by the Labour party, to the Consumer Rights Bill which called for the outright ban on letting agents charging any fees to their tenants. This defeat has the potential of saving tenants millions of pounds. What? Intuitively that doesn’t sound right, does it? Surely agreeing to such a ban would be the money-saver? Well actually, the answer is ‘No’ and I’ll explain why but first I need to provide a little bit of background here.
There is concern among all politicians, whatever their persuasion, that the Private Rented Sector (“PRS”) is populated by a large swathe of unscrupulous agents who are only in it to rip off tenants and landlords. And, with the PRS now approaching 20% of the adult population (i.e. around12 million people living in private rented accommodation) this concern is genuine. The PRS is set to continue growing if the general population grows at the rate predicted and it is estimated the PRS will sit at 50% of the adult population by 2032. It is essential that action is taken to make sure tenants are protected and get a fair deal.
The arguments for banning letting agents charging fees to tenants goes something along the lines of; it is the landlord who is the client of the agent and, therefore, it is only they that should be charged; by charging fees to both the landlord and tenant, the agent is using smoke and mirrors to make an unreasonably high profit; the level of fees charged by some agents to tenants is excessive, and; letting agents find spurious reasons to charge further hidden fees.
Briefly, the counter to these is simple, as a tenant you can go to almost any town or city in the UK and have a choice of quality, legally conforming accommodation which can be secured quickly. We will ensure that the property you rent is fit for purpose and compliant with a raft of legislation. We will take up references and arrange to draw up a tenancy agreement and inventory of condition. Letting agents are also expected to check on immigration status, and arrange for the tenant’s security deposit to be lodged in a Government approved scheme - for the protection of the tenant. There is no parallel industry where businesses are expected to provide valuable and time consuming services without payment.
Ok, that’s all very interesting but answer the question, “Why would it be wrong to ban agents fees to tenants?” I’m afraid the answer is, ‘because it will cost you as a tenant even more in the long run’. And the reason being, most agents don’t make huge profits and if they lose their revenue streams from tenants, the cost element of that will be passed onto the landlord. For the vast majority of landlords, there certainly isn’t enough ‘fat’ in the rent received to be able to absorb such additional cost. So, inevitably, rents will rise and quite sharply to compensate. As we all know from experience of all the various bills we pay in life, when costs are bundled together, the total is higher than when they are individually listed. Our contention, then, is, if rents go up to compensate, they will go up by far more than the one-off charge made by the letting agent.
It is certainly true among the country’s 16,500 letting agents there are rogue and rip-off ones who do need to be dealt with at Government level through sensible legislation. The Consumer Rights Bill did contain an important amendment which, when enacted, will require agents to be fully transparent in publishing their fees and charges. At Martin & Co in Norwich, we already do. While this is a step in the right direction, we would encourage any Government to properly regulate the lettings industry and to licence letting agents. This would be of far more practical benefit to all participants in the private rented sector – both tenants and landlords.
In the meantime, we would urge all parties to protect themselves and use the services of an agent who cares enough about their landlords and tenants and is regulated via one of the professional bodies such as NALS, SAFEagent or ARLA. Finally, tenants please use an agent that has listed in their terms of business all charges that may be applicable to you during your tenancy and, if you don’t like what you see, don’t sign up for the property – exercise your right to vote - with your feet!