Phillip Hammond, the Chancellor of the Exchequer, announced last week that the government will be banning letting agent’s fees for tenants. With the average tenant paying around £350 in fees when they enter a tenancy agreement, landlords and letting agents have traditionally used this to cover any set up and administrative costs involved.
However, following controversy that the fees are too high and tenants are being ‘double charged,’ the government announced a ban of these fees as part of the Autumn Statement proposed on 23rd November.
This change in legislation will save money for those about to move into new rented accommodation which is certainly a positive. Especially for those with less disposable income, the idea of saving a few hundred pounds when entering a new property is very promising.
It also allows for greater transparency in the property industry, as some letting agents have been accused of ‘double-charging’ their tenants. One example is the cost of a credit check which some letting agents charge £50 for, but this costs no less than £3 from participating websites and free 14-day trials are also available.
This is a change that will boost consumer confidence and is part of a larger process to remove agent fees, something that has been achieved through websites such as Tepilo and House Simple. (Source: Techround).
Despite positive intentions, some experts have fought back at the government ban stating that it will cause a boomerang. The debate is that letting agents will still need to cover their costs and this will trickle down to landlords who will need to charge higher rents to their tenants – meaning that several vulnerable families will be worse off financially.
The uncertainty has caused the financial repercussions with Foxton’s share price falling by 14 per cent after the announcement. Several estate agents have argued that it is a ‘minority’ of rogue firms that are charging high letting fees with little justification of what they mean, but it is punishing all the letting agents as a result.
Moving forward, landlords may have to strongly reconsider which letting agents they use if there are expected to pay higher fees. With a greater focus on online property search, landlords could be expected to use alternative websites to find different estate agents to work with or cut out letting agents altogether. Otherwise, it is the tenant, who the government are trying to protect, that will end up paying more long-term.