Ban on letting agent fees is discussed in Parliament with the APPG

Ban on letting agents fees to tenants

Ban on letting agent fees is discussed in Parliament with the APPG

The APPG is chaired by Oliver Colville MP (Conservative) and other Parliamentarians in attendance included Baroness Grender (Liberal Democrats), Andy Slaughter MP (Labour), Lord Best (Crossbencher), Sir Peter Bottomley MP (Conservative) and Kevin Hollinrake MP (Conservative).

Before the meeting both ARLA Propertymark and Shelter provided a briefing distributed to the Group. At the meeting both speakers spoke about their briefings, with David Cox reiterating ARLA Propertymark’s position that the Government should ban upfront fees to tenants; allowing agents to spread the costs associated with these essential services over the first six months of the tenancy.

Tenant passporting

Opening the questioning Sir Peter Bottomley MP asked for more information about a tenant passport and commented that he thought rents are market based and not cost based. David responded saying, ARLA Propertymark could see the benefits of passporting but questioned how it would work in practice. Letting agents’ fees are the smallest cost element for tenants after paying the deposit and a month’s rent in advance.

David added, charging for references is necessary. Rents are market based but do need to cover costs. He said, landlords’ costs are about to increase with the mortgage interest tax changes due next month. Rents may go up as landlords have to take account of costs.

Cost of renting

Baroness Grender commented that tenants can’t choose their letting agent, they get the one that comes with the landlord. She argued that the turnover of tenancies is high, especially in London and supply is an issue. As a campaigner for the ban of fees Baroness Grender outlined that some landlords have taken the decision not to use letting agents that charge fees to tenants and these are mostly large developers. An idea she thinks is a good business model.

Responding, David Cox said that home owners can pay fees more than once; such as when re-mortgaging. He explained that a letting agent works for both sides and the problem is a lack of enforcement against rogue agents who are not transparent.

Need for enforcement

David added that only a tiny percentage of the market behaves badly and it is only the worst cases that come to the attention of MPs, Shelter or CAB for help – the very bottom end of the market. He said over 90% of tenants end their tenancy at their request, all the laws necessary exist, they just need enforcing.

Transparency

Wading into the debate Oliver Colville MP said he supports transparency of all costs including utility bills, but the Earl of Lytton said it would be difficult to define which services for tenants should be included. David Cox responded by agreeing with Mr Colville and said that it was already illegal to charge two people for the same service. Replacing lost keys is a good example of a tenant’s service and should also charge for referencing. David said to the Group that reference checking is a service to the tenant and asked why should the landlord pay if a tenant is not being honest on their reference?

Market failure

As the meeting drew to close Kevin Hollinrake MP was critical of the industry for not acting sooner, but said he didn’t accept Shelter’s description of the industry. He argued that the industry needs proper oversight and this includes landlords, which he deemed another area of market failure. Mr Hollinrake agreed that there was a need to drive out the cowboys and that a ban may push rents up a bit, but it was reasonable to expect this.

The Government have yet to release the consultation following its announcement at the Autumn Statement on 23 November 2016 that it will ban letting agent’s fees to tenants. If the APPG session is anything to go on, then there are more questions than answers. The Government need to respond to these questions if the proposed ban is to improve competition in the private rental market and give renters greater clarity and control over what they will pay.

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