Katie Law Responds to the Autumn Statement
Thu 24 Nov 2016
Katie Law, Lettings Business Development Manager for Millerson, gives her initial response to the Chancellor’s Autumn Statement
To the casual bystander the proposed banning of letting agents’ fees to tenants, as announced in the Chancellor’s Autumn statement, can only be a good thing. The motivation behind it is clear; to make it easier and cheaper for tenants to find homes and to foil the ‘money grabbing letting agents’. However, while there are undoubtedly some unscrupulous letting agents who have been charging exorbitant fees to cash strapped tenants, there are also many who are simply charging enough to cover costs and make their business viable. Why do they feel the need to charge fees? The answer is that there are five services which these fees contribute towards: 1) obtaining a reference for the potential tenant, 2) creating a comprehensive inventory and schedule of condition report, 3) creating a tenancy agreement, 4) the registration and protection of the tenancy deposit and 5) the general administration required in setting up a new tenancy. All of these are time consuming processes, and need to be paid for by someone.
Of course, the argument is that because the agent is working on behalf of the landlord then the costs should be met by them. This argument might hold some weight when related to tenant referencing, but when the inventory/schedule of condition, tenancy agreement and registration and protection of the tenancy deposit are considered then they are most definitely in place to protect both landlord and tenant. It would be a foolish tenant who moved in to a property without having an inventory/schedule of condition report. This document is heavily relied upon at the end of the tenancy in case of any proposed dilapidations claims against the tenancy deposit.
This move is yet another blow for landlords, who are already reeling from the increase in stamp duty for second homes and the restriction of their ability to deduct their business costs from their taxable income. At a time when the housing shortage is becoming so critical it seems madness to be discouraging the very people who might be able to provide some of the much-needed homes. If the tenant is no longer to contribute to the costs of a rental transaction the costs must be met in some way. Inevitably the landlords’ fees from the agents will increase, leading to, guess what? A subsequent rent increase for the tenant. Only, instead of this being a one off payment it will be an ongoing cost for as long at the tenancy goes on.
The most surprising fact about this whole process is that this major policy announcement has been made without any consultation with industry experts. Indeed, only last month The Property Ombudsman announced a joint initiative with Trading Standards to make agents aware of their mandatory responsibilities to clearly display fees. There was no indication that fees were actually going to be scrapped altogether. In fact, this proposal to scrap fees for tenants was a major factor in Labour’s manifesto at the last election. The other factor was the proposed introduction of minimum three year tenancies. Will this be next?