Autumn Statement Comment: Government Announces Plans To Scrap Letting Agency Fees

25th November 2016 by

As part of its strategy to help JAMS (just about managing) people, the Chancellor has announced plans today in the Government’s Autumn Statement that landlords in England and Wales will be banned from charging letting agents’ fees to residential tenants.  No date has been set for the onset of the legislation, but the government hopes this will be “as soon as possible”.  There is already a ban in place in Scotland.

Whilst the announcement was well trailed in advance, there has already been a furious outcry from letting agents and landlords, but the proposals have been broadly welcomed by housing charities and presumably by renters.

Tenants can be charged a fee for before entering into a tenancy, which usually covers administration e.g. reference, credit and immigration checks and also fees for preparing tenancy agreements.  Costs vary widely between £200 – £500, and they are generally more expensive in London.  The average is believed to be around £330, and the costs are non-refundable.  The government is looking to shift these costs onto landlords and estimates that this will save some of 4.3 million households, hundreds of pounds in paying out for non-refundable fees.  Some believe the current charges are unfair as Agents usually charge the landlord a separate fee, often a percentage of the rent, so, in effect agents are being paid twice.  However, agents say they do not profit from letting fees and someone has to pick up these costs.

It remains to be seen how well the government’s plans will work in practice.  The hope will be that this will spur on more competition, as landlords unlike tenants, can shop around for the cheapest agent.  However the end result may just be to push up rents as landlords look to pass on these costs to tenants, so at the end of the day, the proposals could do little to help renters.  Many in the industry say the government would have been better off in pushing for tighter regulation on fees, or more transparency, rather than going for an outright ban.

For further information, contact Mark Davies or Kiri Kkoshi on 020 7822 4000 or email property@healys.com.