Letting agents' fee ban: Tory MP warns of "unintended...

A Tory MP has taken to the internet to warn against what he calls the “unintended consequences” of a ban on letting agent fees levied on tenants.

Mike Freer, Conservative MP for Finchley and Golders Green, says some letting agents “do seem to like having their bread buttered on both sides” but says that he has a much better understanding of how fees are levied now that he has spoken with one agency - Martyn Gerrard - which operates in his constituency,

Freer, writing on the Conservative Home activists’ website, makes a lengthy case for how at first sight the ban - announced by Chancellor Phillip Hammond on agents’ fees applied to tenants in England - could perhaps be seen as justifiable.

However, he then warns of the unintended consequences that could, in fact, see tenants worse off as a result.

His is a lengthy post and LAT reproduces below just part of the argument. It may add weight to the argument put forward by some industry groups that it remains worth lobbying MPs and other politicians about this issue

“... This is because letting agents, according to the consensus, will shift the lost income generated from tenants to the landlord by chargibg higher fees. This coupled, with a shortage of stock (as investors are further deterred from entering the buy-to-let market), will lead to an increase in rents. In Scotland, where all but rent and refundable deposits were banned in 2012, the evidence shows that rents have risen as a direct consequence of the ban.

“The average fee paid by tenants quoted by the Government is £233, while Shelter quotes an average of £350. The reality for many tenants, especially in London, is a much higher figure. But what is a fee, and what is a reasonable cost?

“For example, I would hope that a holding deposit will be seen for what it is, rather than a fee that is banned. It is not unreasonable for a prospective tenant to put down a deposit – which goes towards the dilapidation deposit when the tenancy begins – to show commitment, and to assure the landlord that he or she is serious about taking the property. A ban on non-refundable holding deposits will mean that tenants could express an interest in multiple properties, giving rise to costs to the landlord and agent…and then simply walk away without any consequence. This is surely not the Government’s intention.

“Similarly, is it unreasonable to ask a prospective tenant to provide evidence of his suitability as a tenant?

“This usually involves an independent company providing a report having carried out credit, employment, previous landlord, immigration and right to rent checks. Again, if the tenant does not have to pay for this, what is to stop him showing interest in multiple properties, with each of these landlords paying for separate referencing checks only to be disappointed? Will a landlord be prepared to carry out these checks without any assurance that the tenant is serious, and what will happen if the tenant fails the checks? If the tenant is paying, he will be as certain as he can be that there is nothing in their past that will mean they fail the reference check.

“My concern is that if all the costs are to be borne by the landlord, there will be letting agents who will try to compete for business by cutting their fees. This will inevitably be at the cost of the quality of the service and checks they provide. Landlords tempted by the cheap fee will be left dangerously exposed, since the agent may well have had to cut too many corners in order to offer a low fee.

“In a speech that lasted 51 minutes, the Chancellor’s announcement to ban fees to tenants took just 26 seconds. Details of what is intended are sketchy to say the least. This will lead to confusion for tenants, since as it is unlikely the ban will come into force until 2018. DCLG has not given any more information other than ‘Government will begin consultations in due course, and primary legislation will follow to bring the ban into effect’.”