In his autumn statement, Chancellor of the Exchequer Philip Hammond announced a crackdown on lettings fees for tenants. The move met with mixed reactions. On one side, government ministers and tenants groups said that it would ease the burden on tenants paying unnecessary fees for a simple service. On the other side, critics said it would lead to a number of problems.
No Signing on Fees
One of the biggest drawbacks for any tenant is requiring a large amount of money when moving into a property. Naturally, a deposit is required. However, agencies typically charge administration fees. They also charge for renewals. While most agencies charge a reasonable for this, there have been media stories of agencies charging tenants hundreds of pounds for a simple credit check. This issue (particularly in London) drove Hammond to enact the measures.
Higher Rents
The NLA and other groups are already warning of higher rents. If tenants can no longer legally be expected to foot some of the administration fees bills, agencies will have to pass this on to the landlords. In turn, they will increase rent for tenants. Either way, critics argue that tenants are going to pay no matter what happens. Landlords are able to claim these costs against their tax burden, but ultimately they will want to protect their bottom line profit.
Generation Rent Has Another Perspective
Tenant campaign group Generation Rent deny that this will affect landlords directly and tenants indirectly. They argue that rental cost is about market trends – supply and demand. The lack of supply for housing has led to high rental costs and unnecessarily high letting agent fees. Now that the government has committed to improving the housing market, rents are likely to drop and not rise. They suggest that rent should be on a downward trend in the coming years.
The Scottish Situation
Philip Hammond’s announcement in the Autumn Statement was not a new suggestion. The devolved Scottish Parliament banned letting agent fees many years ago. Another campaign group Priced Out said that this measure had had no discernible effect on the market in Scotland. They said that landlords in Scotland have absorbed most of the cost. Even those that have passed it on have allowed tenants to spread the cost of the increased fees – either situation is beneficial for tenants.
First, Consultation
It’s important to remember that the measures to ban lettings fees to tenants have not yet been enacted. Hammond announced an extensive consultation between all stakeholders – and that will include both tenant and landlord groups. At present, traditional lettings agents have been able to charge administration fees (such as checking fees, credit references, guarantor checks) to both landlords and tenants. When and how this will change will arrive in due course.