The Association of Residential Letting Agents says the costs of tenant referencing must be exempt from the government’s proposed ban on letting agents’ fees imposed on tenants in England.
ARLA, in a note to members and released to the press, says the reasons for this are manifold.
“Referencing ensures that tenants do not take on a financial commitment which is unsustainable. Referencing reduces the risk of tenants falling into rent arrears which often results in them being evicted and subject to County Court Judgments.
“This can lead to a drop in credit rating and difficulty sourcing other rental properties or making successful mortgage applications, along with difficulty sourcing low cost credit from mainstream suppliers. Quality referencing helps to reduce homelessness.
“While it is frequently said that referencing is available for a few pounds this is not accurate. Our primary research has shown that agents list referencing as one of the single most time consuming aspects of the role.”
The association insists referencing is not simply a case of sending a form to a third party; it is frequently a complex process which is in part required by law and made more complicated by government initiatives like Right To Rent.
“Referencing involves ensuring forms are completed properly, making requests to referees and guarantors, checking a tenant's credit history, liaising with an external referencing company, collecting employment evidence and information from previous landlords, checking passports or other documentation, storing copies securely and scheduling and carrying out follow up checks where legally required.”
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Why should landlords expect tenancy reference fees to be paid by the tenant? If you apply for a job, you'd be flabbergasted if your potential employer asked you to pay upfront for references to be obtained as part of the recruitment process. By the same token, when applying for a loan or bank account, you are not asked to pay for any credit checks undertaken. These costs arise as a result of the landlord wishing to make sure that the tenant they choose meets THEIR criteria and should be factored into the business costs involved in running the tenancy. Tenants pay rent for the privilege of renting the property and this, along with a deposit if deemed necessary, should be all they are required to pay.
What do you think the near £1,000 application fee covers for the when you apply for a mortgage is for then?
Good point on the loans issue Sue. But I'm guessing the cost of referencing for a loan increases the cost of it and it would be the same with rents too. Customer pays the cost one way or another.
Transparency is the key to all of this, who pays for what and when? Credit checks cost a few pounds but getting an employer’s reference takes staff time to collect. The same with previous Landlords references. Take the charge off the tenant and this transfers to the Landlord and therefore at the earliest point the Landlord will increase rent to pay for it. In life, nothing is actually FREE. I liked the idea of a fee cap but this I think never really got off the ground so shouting about what we actually do for the money is the next best thing, the problem is, is anyone in government prepared to listen. All I can say is every Letting Agent must shout about what they do and that its not a free service. That is all we can do, I will do my bit just make sure all agents also educate everyone in what will happen when the ban comes in and see if there is an alternative. We can only wait and see.
I still find it incredulous that government believes it can influence free will. Perhaps if they had a rethink about stamp duty for first time buyers, this might actually assist with alleviating the current demand for rented properties, which would then have a contribution to how agents treat prospective tenants. Not charging what they want because they can, but actually having to provide incentives to tenants to secure them. Its all about supply & demand. Perhaps the government can turn their attention to capping the utilities companies, as this cost is now becoming a big factor in everyone's living on a continual basis, not just a one off cost that they seem hell bent on attacking.
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