Lib Dem peer Olly Grender has welcomed the Government’s reported plans to ban lettings fees for private tenants. This move didn’t come out of thin air but as a result of tireless campaigning by the Liberal Democrats and others. Olly and Tom Brake have been pushing this in both houses of Parliament and have taken part in demonstrations. Liberal Democrat council groups up and down the country have also been campaigning on this issue.
Olly said:
Our relentless campaigning to get tenants’ letting fees banned has finally paid off and the Government has recognised this is the right thing to do. The upfront costs of renting are far too high, pushing many people into debt just to pay the fees, and stopping others from being able to move into a rented home.
“It’s no coincidence that just five days after the debate on our Renters’ Rights Bill, which urged the Government to ban these fees, they have agreed to make this important change. Now they must agree to our calls to make renting safer and more secure too.
It’s worth looking at the real, practical effects that this move will have. Only last Thursday, Olly spoke in Parliament in support of her Renters’ Rights Bill. She described the suffering that charging tenants hundreds of pounds actually causes:
Shelter’s research shows that average letting fees are £355 per move, with one in seven people paying £500. On rare occasions, renters have been forced to pay fees of £900 or more to a letting agent, simply for the privilege of moving into a home. Reference checks, credit checks, administration fees, inventory fees—the list goes on. Invariably, the fees charged are extortionate compared to the cost actually incurred by the agent and they are not necessary. Furthermore, any cost actually incurred should be covered by the lettings agent’s client—the landlord—not by the tenant. Far too often these high up-front costs are proving a barrier to tenants, who simply cannot afford to move.
This week Radio 4 broadcast a documentary, presented by Sarah Montague, called “After Cathy”, 50 years on from Ken Loach’s “Cathy Come Home”. It featured the audio diaries of three homeless people over the course of a year. One of them, Zara—not her real name —from London, a teacher and mum of a three year-old and an 11 year-old, had lived in the same private rented home for six years when her landlord put up her rent. She could not afford to move to cheaper accommodation because she could not afford the up-front costs of moving. This teacher is now homeless and has been living in emergency accommodation with her children for a year—a teacher. Does anyone in this Chamber really believe that this teacher, who could not afford the up-front costs to move to cheaper accommodation, would have been helped by a nice clear and transparent breakdown of the additional costs of the credit check, the inventory check, the administration charge and the cleaning costs, on a nice large poster in the lettings agency’s office that complied fully with the Consumer Rights Act, with clear guidance about who she could complain to if the fees were not sufficiently transparent? Does anyone genuinely believe that at that critical moment when she could not afford the up-front costs to move somewhere cheaper, transparency would have made the difference? It would not.
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15 Comments
Presumably the letting agents will not work for free and will in future charge the landlord who will pass on the cost in higher rents.
@David Evershed As I understand it, a very similar policy has been successful in Scotland for some years. Letting agents typically are paid a percentage of the rent by the landlord; the problem seems to me to be that they regard that as being pure profit, not an amount out of which reasonable expenses should come. Additionally, whilst no-one is suggesting that a credit check on prospective tenants is not reasonable, the actual cost of these is on the order of £25, and the amount charged by a letting agent is considerable more than this, and that’s not even getting into the ludicrous “signing fees” charged by some agents.
David Evershed that may well be the case, but even so is it still not fairer that the costs are spread evenly across whoever lives in a property at the time rather than heaped on those who for whatever reason have to move more often? And of course if the cost of moving is artificially high it limits people’s opportunities to move, hence keeping prices artificially high. Keep the cost of moving down and tenants are more empowered to shop around.
Billy
You are suggesting that people who move more frequently should be subsidised by those who move less frequently. Is that fair?
Thanks for engaging with me David, actually I think yes it is. By far the biggest cost involved in letting a property is the property itself. Plus as I said before, keeping it as easy as possible to move makes the market function better to keep prices down.
Is Philip Hammond acting against the backdrop of some analysis or is this just a popularist move to detract from the rest of a shocking autumn statement. I have over 25 years experience in lettings and a far better response would have been to moderate fees in some fashion. I can tell you now that we charge £45 + VAT for each reference we have to process. For this we will collate documentation and pre-check the application. Only when we are 95% confident that the referencing will pass do we charge. The referencing is done by an independent referencing company who charge £22.00 + VAT. Invariably the only reason they fail is if the applicant has lied about their circumstances or they have CCJ’s that they are not aware of. At that point we try to get to the bottom of the issues and in most cases negotiate a resolution. We then charge a one off property admin fee of £70.00 + VAT (irrespective off how many people are living there) to the tenants when they move in. This fee goes to sharing the landlords costs generating the paperwork and providing an independent written/video inventory. I will go to the property to see the tenants in. Make sure they know how to use the central heating system, show them where utilities are including water stop cock, consumer unit etc. These costs cannot be swallowed by the landlord who will have to put up rents to compensate. A typical payback period would be 9 months meaning that the rents will have to rise by approx £20.00 p.c.m. Obviously if the tenancy is longer then tenants are going to lose out. In addition the charging of admin fees put a service duty on the agent which will be completely absent when these changes come into effect. It will be ‘pick the keys up from the office’. I for one will be biased against tenants who need guarantors and if there is any chance the reference will not be successful we will not take the risk of incurring costs that we cannot recoup. If you have complicated circumstances then you will find it harder and harder. One point on paperwork; a typical set of paperwork is probably 50 pages when you consider the tenancy documents, deposit documents. inventory documents, EPC, gas safety certificate and others. Another misguided, uneducated move by a government that failing to lead this country. Welcome any dialogue, but it’s a bit late now.
David Evershed
“Presumably the letting agents will not work for free and will in future charge the landlord who will pass on the cost in higher rents.”
That is the more liberal approach, if pricing structures are transparent then competition is fairer and the market is more transparent.
Excellent news. Many letting agents have been steadily increasing their fixed fees for new tenants when any costs incurred are relatively fixed, it basically profiteering because they can get away with it as renters have no choice.
It’s not the experience in Scotland that rents have increased in the way that David and others have suggested.
Good news! With perhaps a very few honourable exceptions letting agents have for years been in a feeding frenzy with fees and it’s time it was stopped.
@PJ
” I can tell you now that we charge £45 + VAT for each reference we have to process. For this we will collate documentation and pre-check the application. Only when we are 95% confident that the referencing will pass do we charge. The referencing is done by an independent referencing company who charge £22.00 + VAT. Invariably the only reason they fail is if the applicant has lied about their circumstances or they have CCJ’s that they are not aware of. At that point we try to get to the bottom of the issues and in most cases negotiate a resolution. We then charge a one off property admin fee of £70.00 + VAT (irrespective off how many people are living there) to the tenants when they move in.”
So that’s a total of £164 (inc VAT) that you charge for putting details into a computer, doing a basic finance check (which you admit costs you much less than you charge), photocopying some paper and nonsense ‘admin’ fees? Quite apart from any costs tenants have moving, the first rent payment, the deposit? And you wonder why the government has banned these spurious charges? Estate agents have only their own greed to thank for this. Others routinely charge even more than you, at least now landlords have the chance to shop around and there’ll be more of a market.
@Boo
So you don’t want to pay rent. You don’t want to pay a deposit and you don’t want to pay VAT.
I wish I didn’t have to pay for computers and software, rent, lighting and heating, insurances an indemnities.
I wish I didn’t have to comply with the numerous housing acts and deregulation acts which puts more and more regulations into the rental market. I think cars and travel should be free. I wish I didn’t have to earn a living.
Believe it or not I have a social conscience, I am not a rich person. I do believe that some agent are guilty of over charging. If you read my whole comment you will see that it tries to be balanced and explain why abolishing fees rather than regulating them will work against tenants in the long run. The housing market in the UK is a mess. Demand massively out strips supply. Rents are increasing at an alarming rate and homelessness is at an all time high. Unfortunately when landlords shop around they will go to the agent that promises to get them even more rent.
The upfront costs of renting are far too high, pushing many people into debt just to pay the fees, and stopping others from being able to move into a rented home.
No different really for those who own their own homes and wish to move…
I’m sure the government would be very happy for all the house purchase costs being added to the price of the property and thus be liable to stamp duty etc…
Whilst I would accept that some lettings agents charge excessively high fees, the solution isn’t to include them in the rent. If the fee’s are £355 per move, then naturally that will become at least an additional £40 pcm on a 12-month agreement ie. £480, as then it will need to include payment processing charges, borrowing costs, insurance, administration…
I must admit to being naive on this subject. I own my own place now, but did rent for many years, with my last new letting agreement being about eight or nine years ago. There was always a fee when I’ve taken out a new agreement, but I always thought it was reasonable to cover costs of references, paper-work, having someone come round and do a proper inventory and sometimes getting the place professionally cleaned. I think the most I ever paid was £100 (between four of us), but the last couple of times, when it was just me, I was paying less than £50.
I’m shocked to discover just how much some of the letting agencies have been charging, and it’s clearly just a ploy to make the rent seem more attractive, and then to spring this hidden charge on people who have already got their heart set on a property. Congratulations to all of those involved in this, and it’s a good reminder to me that my own experiences are not always representative.
That said, I was stung a couple of times by landlords who claimed that they needed to hold back some of my deposit for spurious reasons. One of them that we hadn’t cleaned the flat (we had) was one that charged us for it to be professionally cleaned before we moved in! There’s no doubt that many landlords and letting agencies will find any excuse going to up their margins, and a lot of people just go along with it because they think that’s how it’s supposed to be, or don’t feel they have a choice but to put up with it to have the home they want/need.
‘Rents are increasing at an alarming rate and homelessness is at an all time high. Unfortunately when landlords shop around they will go to the agent that promises to get them even more rent.’
What if they didn’t? What if they went to the most ethical agent in which they could develop a strong relationship with? Why should policy be formed around the lowest common denominator?