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Confirmed: No ban on letting agent fees

Posted on 2015-10-20

Last month the Government confirmed that it would not be pursuing a ban on fees letting agents charge to tenants.

This outcome perhaps comes as little surprise to many as the Government has shown little to no appetite for a ban on fees over the past few years.

That said, there have been a number of reports and investigations into the effectiveness of a proposed ban.

The findings of the latest – Private rented sector: the evidence from banning letting agents’ fees in Scotland – have pushed the Housing Minister, Brandon Lewis, to confirm that there will be no ban.

Here's what Brandon Lewis had to say about the Government's decision not to impose a ban on fees:

“The Committee concluded that the evidence available was not strong enough to reach a verdict and recommended the Department for Communities and Local Government commission research to determine the probable impact of a ban on letting agency fees in England.”

“Government is determined to create a bigger, better private rented sector. I believe that the current legislation strikes a fair balance between the rights and obligations of landlords and tenants. In the past over-regulation and excessive red tape drove many landlords out of the rental market. My Department therefore has no plans to further regulate the private rented sector by banning letting agent fees in England, as this would only reduce the numbers of properties available to rent which would not help tenants or landlords.”

Two key things to consider:

Why did the Government decide against a ban?

Well, as you can see above, the main reason is that the most recent report could not find enough evidence to suggest that the ban on fees in Scotland had affected the Private Rented Sector either one way or the other. There was a previous report, published back in March, which was chaired by Clive Betts MP.

That report, which also found that the evidence from the Scottish ban was not enough to determine the impact of a ban in England, called on the next Government to assess a ban's potential effect on the rental market. This is why we’ve just had the latest report and subsequent decision from Brandon Lewis and his colleagues. We have written on the previous report and discourse around a ban before in more detail, which you can find here.

Another reason for this decision relates to fee transparency rules introduced in May. These require letting agents to publicise a full breakdown of the fees they charge on their websites and in their offices as well as whether they offer client money protection and which redress scheme they’re a member of. The Housing Minister says that he believes these rules will allow tenants and landlords 'the ability to compare prices and assess value for money, thereby strengthening the consumer’s choice.' Lewis also confirmed in his statement that his department will re-investigate the potential effects of a ban on fees in England if it becomes clear that the transparency rules are failing.

What about Scotland?

Since the Scottish ban in 2012 the overall message, found by several reports including those mentioned above, is that it’s difficult to determine the ban's true effect on the rental sector. The majority of reports have shown that rents continue to fluctuate North of the border which would seem to suggest that the banning of fees has had little effect on average rents charged by landlords, which are still mainly affected by supply, demand and the seasons. For example, taking a look at our HomeLet Rental Index, in September 2011 – before the ban – the average rent in Scotland was £591, while as recently as February 2015, the average figure was only £5 higher at £596. In the time in between, the average rent in Scotland has fluctuated between £590 and £650.

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