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Fees ban: Welsh Government consultation review

Posted on 2017-10-04

Fees ban: Welsh Government consultation review

When the Chancellor, Philip Hammond, shocked the property industry last November by announcing proposals to ban upfront letting agent fees charged to tenants, it set a ball rolling that has been gaining momentum ever since.

A ban on fees in England is likely to be introduced at some point during 2018. And since Hammond's surprise announcement, there have been movements to ban upfront agent fees in Northern Ireland and Wales.

This means that in the near future, letting agent fees could be banned in all corners of the UK.

Back in July, the Welsh Government launched its official consultation into a ban on fees. This period is still ongoing and below we outline what is being put forward and how agents and their landlords can respond.

What's in the consultation?

The consultation document says its purpose is to gain views from interested parties on what action the Government should take to 'end unfair fees charged to tenants'.

In its introductory passages, the document suggests that the majority of tenants have no choice over which letting agent they work with, whereas landlords do. It also argues that many agents 'lack transparency' as they don’t offer a full breakdown of upfront tenant charges.

The consultation then quotes a 2016 report from Shelter Cymru which found that fees in Wales vary from £39.99 to £480 with one in three Welsh renters paying over £200 in fees to an agent before starting their tenancy.

The Welsh Government details its own views and plans, saying it believes many of the fees charged to tenants to be 'unjustified' and 'arbitrary', adding that in some cases high fees could act as a barrier to rental accommodation. Their proposal is a ban on letting agent fees charged to tenants alongside a ban on tenant fees charged by landlords and third parties, explaining that it believes a ban on fees will 'incentivise' agents to offer more competitive services for landlords, while providing a more 'level playing field' for tenants.

The document concludes by explaining that it seeks to determine which fees charged to tenants are unjustified, as well as how much agents charge landlords and the possible consequences of a blanket ban on agents' fees.

Respondents are then invited to answer a questionnaire which is split into 31 questions, including general questions and ones specific to tenants, landlords and letting agents.

Timeline

  • November 2016: Philip Hammond announces proposals for a ban on upfront agent fees charged to tenants in England.
  • January 2017: Two Welsh Parliament members apply to introduce letting agent fee ban legislation in Wales.
  • March 2017: Trade bodies ARLA Propertymark and the Residential Landlords Association write to the Welsh Government, raising concerns about the implications of a ban on fees.
  • July 2017: The Welsh Government launches its official consultation into a fee ban.
  • August 2017: Welsh Assembly Member Carl Sargeant encourages tenants to respond to the consultation.
  • September 2017: The official consultation period is due to close on September 27.

Looking to the future

The consultation closes later this month and then it is down to the Welsh Government to publish its official response. The English consultation on a fees ban closed in June and the Government is still yet to respond, so it's difficult to know when the Welsh Government will publish its findings.

As with England, it looks extremely likely that a ban on upfront fees charged to tenants will go ahead in Wales. It is likely to occur next year, although the process is a few months behind its English counterpart so it may not be introduced until a little later down the line.

How to respond and further reading

You can read and respond to the full consultation here. The Welsh Government is accepting both written and online responses, all of which will need to be submitted by Wednesday September 27.

Since the consultation was launched in July, the Welsh Government commissioned a study into letting agents and the fees they charge. The results were published in August, showing some interesting findings:

  • 29% of private rented housing in Wales is managed by letting agents;
  • 84% of agents surveyed charge a setup fee, averaging £178 per tenancy;
  • Approximately 19% of letting agency income in Wales comes from fees charged to tenants, a total of around £10m per annum;
  • Two thirds of the agents surveyed charge a fixed fee per tenancy and did not break fees down by what they covered;
  • The vast majority of agents either ask for a holding deposit, or use the fees charged as a deposit to ensure a commitment from tenants.

You can read the results of the study in full here.

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