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The proposed letting agent fee ban: an update

Posted on 2015-04-23

For the UK’s letting agents and landlords, much of this time last year was spent debating, reading and worrying about a proposed letting agent fee ban.

First put forward by the Labour party in early 2014, a ban on admin fees charged to tenants is seen as a backwards step by many property industry insiders.

The argument is that if tenants no longer have to pay these fees agents will pass them on to landlords who - unavoidably so - will end up adding these to rents, meaning the tenant will end up paying the fees in one form or another.

The past year

After much campaigning, a proposed ban on fees was tabled as an amendment to the Consumer Rights Bill in the Commons by the Labour party during May last year.

The Government stopped short of a ban but did agree that letting agents must publish full details of all fees that they charge to tenants.

Previously, the Advertising Standards Authority only required agents to list compulsory charges up front to the tenant. The move to require all agents to publish a full tariff of their tenant fees, both prominently in their offices and on their websites, was regarded as a positive step forward in the crackdown on rogue operators.

After the amendment to the Consumer Rights Bill was defeated, the discourse around the subject died down for the remainder of the year, despite Labour MPs Stella Creasy and Emma Reynolds campaigning passionately for a ban on admin fees.

As we moved into the New Year and the talk of the general election started to ramp up, so did the campaigning and debate surrounding the abolishment of letting agent fees…

The current situation

Despite the fact we are now moving towards the middle of 2015 the picture remains one of uncertainty. In early April the Labour party confirmed in its manifesto that should Ed Miliband win the general election in May, letting agents will be banned from charging fees to tenants.

Labour says that this will save the average renter entering a new tenancy £350. The manifesto also states that fees charged by letting agents to landlords should be ‘transparent’ so that they know what they are paying for.

Although it may not have an impact on the election and therefore the future of the Private Rented Sector (PRS), the Green Party also published in its manifesto that it would abolish letting agents fees charged to tenants if elected. The National Landlords Association has heavily criticised the Green Party’s proposals for the PRS, saying it has taken a ‘one-sided view’ of the rental market.

Interestingly, towards the end of March, a Communities and Local Government committee published a report which concluded that the next government should assess the impact on the PRS before making any decision to ban, or rule out a ban, on fees.

The committee found that the evidence from the existing ban in Scotland, introduced in 2012, was not strong enough to reach a view on the impact of a possible ban in England. Clive Betts MP, chair of the committee, said that ‘the jury’s still out’ and ‘neither position is underpinned with convincing evidence’.

The future

So, it is quite evident that the future of letting agent fees in England and Wales remains highly dependent on the outcome of next month’s election. One thing is for sure, that should a ban be introduced later this year it will have a significant impact on letting agents’ pricing structures and the way they charge for administration costs. However, as seen in Scotland, it may not have quite the effect on monthly rents and market averages as expected.

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