Tenant fees ban brings joy and misery

The Tenant Fees Act 2019 comes into force in England today and there is sure to be much rejoicing among those who choose or are forced to rent a home.The government has placed a blanket ban on all upfront charges including fees for credit and referencing checks, tenancy renewals and various other “administration” costs that add up to an average non-refundable £272 per person.The Tenant Fees Act will also cap deposits at a maximum of five weeks’ rent and one week’s rent for holding deposits.Grace Booth, 24, is delighted. She has lived in four rental apartments in Leeds since leaving university and expects to be renting for at least another five years.“I had to leave two flats because the owners wanted to sell them and one I left by choice but altogether the checks and administration fees have cost almost £700.“Obviously, I’m really pleased about the ban on fees. I do accept there is a cost involved for the letting agent but some of them were just too greedy.”

Rents could rise

While the ban may appear to be good news for tenants, there are fears that letting agents will simply pass the fee costs onto landlords who will in turn raise their rents.Will Linley of Yorkshire sales and lettings firm Linley and Simpson says he tried to warn Yorkshire MPs about fees issues and suggested that they should be capped, thereby preventing greedy agents from making excessive profit from tenants.“I tried to engage with local MPs. Most didn’t respond, three wrote back with the same templated letter saying they supported the ban and one met with me and was shocked when I explained the implications.“Part of the issue is that most MPs are in a London bubble and they are looking at greedy agents there and the huge amount they get in fees and then tar us all with the same brush.”He and others believe that both reputable and disreputable lettings agents will go out of business due to the ban.“It is a loss of revenue for all lettings agents in what is not a massively lucrative business. Some will suffer more than others, including some of the national letting chains because their business model has been to increase charges to tenants while reducing fees for landlords in order to get more properties on the books. That is wrong and had to be corrected but abolishing fees altogether will impact on reputable agents,” says Will.“There is a financial cost in making checks, conducting viewings and drawing up contracts and I think some of that should be borne by the tenant, which is why I campaigned for a cap.”

Pressure on agents

Linley and Simpson has worked to minimise the impact of the ban on its 16 branches by introducing new ways of working and using new technology“The 140 pieces of legislation to comply with during a tenancy and a relentless stream of legislative changes has placed unprecedented pressures on agencies.The ban on charging tenant fees will be the tipping point for many,” says Will.“Smaller, independent agencies seem particularly vulnerable. They are handcuffed by not having the same economies of scale and ability to absorb overheads as the larger chains.”He adds that smaller independents are choosing or being forced to merge or sell up in ever-increasing numbers.“We have never seen as many letting agent acquisitions in Yorkshire in our 22-year history as there have been in the run-up to the fees ban. I expect this trend to continue.”

Unintended results

Glynis Frew, CEO of Hunters property group, also believes that when it comes to government housing policy “good intentions have brought undesirable consequences”.“It’s frustrating because the industry and government are actually joined up in their desire to ensure that tenants get a fair and honest deal. A small number of rogue agents or landlords have charged mind-boggling fees over the years, that’s a sad reality, but that’s not a fair reflection of the industry as a whole.“Agents and landlords proposed and would have embraced fee caps but the government chose to reject those calls. It now needs to ask itself if this legislation is going to do the job it is intended to do. Will this really benefit tenants? Market forces will take their natural course and rent increases are likely to follow in many locations, especially where tenant demand is strongly outstripping supply.”She also makes the point that in a period of four prime ministers, there have been 17 different housing ministers spanning 20 years.“Not one has managed to build the number of homes the country is purported to need.“Maybe, just maybe, if we had a Housing Minister who stayed long enough to understand the housing industry and the market, we would all do so much better. Housing should not be a vote- winning political football, it’sfar too important than that. To all of us.”