Lettings agency tells MPs to go for fees cap but not outright ban

A lettings agency has written to MPs setting out an eloquent case for a cap on agents’ fees levied on tenants - but not the outright ban requested by the government.

The case was set out in correspondence from Kent-based Regal Lettings to the Communities and Local Government select committee of MPs undertaking preliminary work regarding the Draft Tenants’ Fees Bill, which calls for an outright ban.

Earlier this week the committee held a two hour session hearing oral evidence about the ban, which included substantial criticism of the proposal and claims that it would increase rent for tenants, put unfair and unrewarded burdens on agents, and would indirectly lead to fewer properties in the letting sector - thus forcing up rents as demand exceeded supply.

However, submitted as written evidence was a particularly interesting letter from Regal Lettings, which is reproduced on the select committee’s website and is below:

“The Government has now released a draft bill in which it intends to bring forward a full ban on fees charged by letting agencies to tenants. This would have a profoundly negative impact on landlords, tenants and agents. Economic research commissioned by ARLA Propertymark shows:

• Landlords are likely to pass on their increased costs to tenants in the form of higher rents. As a result tenants will pay an extra £103 per year

• Service levels provided to Tenants will drop

• This means those tenants who move more frequently will receive savings on overall costs but longer term tenants, who are likely to be lower income families, will see a loss

• As a result, the proposed ban contradicts the Governments stated aim to encourage longer term tenancies. The economic research proves that fees cover real work which must be undertaken, and these costs need to be recovered. Tenant referencing and mandatory Right to Rent checks take up to eight hours on average to complete and I believe this should be excluded from the ban.

“If Tenants are not paying for a service or parting with any fees it will encourage them to become time wasters and applying for multiple properties as they have no consequence for pulling out at any point or on any property. There is nothing stopping them from now abusing the system and taking advantage of the referencing process which costs money, companies also have to pay staff and for resources to set up tenancies in the first place. At the end of the day the Tenants at the moment are being provided a service just as much as the Landlord.

“On top of this we have to create legal documents which take time, they then need to be checked, we have to attend on the first day of the Tenancy for managed properties and test the smoke alarms also. All of this costs in paper, printing, staffing, petrol and man hours to complete. We pay to be a part of a client money protection scheme, Redress Scheme, deposit scheme and pay for our documents to be updated by legal advisers all of this is to the benefit of both the Tenant and the Landlord this is on top of all the running costs of the business to be able to facilitate our services to both the Tenant and the Landlord. 

“With less agents around Landlords may be forced to manage their properties privately and most private landlords are ignorant to the legislation and legal processes in place for renting their property out because they do not have an agent to advise them, this in turn will lead to properties being illegally managed and ill handled and ultimately the Tenants suffering again.

“Agencies have to pay staff to carry out these duties which are of benefit to the Tenant and are of service to them. From advertising a property which also costs money the process can take eight to fifteen hours of work just to get the Tenant to the point of moving in, let alone then managing a property for the duration of the Tenancy. We are an independent agent and our fees are not extortionate they are reasonable although I do agree the likes of the corporate agents do charge excessive fees.

“The logical way forward would be to aim for a  cap on what agents can charge so that all agents can take a fee to cover their costs and time that is just and reasonable. This way Tenants are not extorted into paying too much and agencies can continue retaining staff.

“Any industry has costs involved and administration fees are charged why should it be any different in this one. An outright ban would cripple some agencies who would have to close down, others would need to cut staff meaning redundancies would be made and ultimately the rents would increase as costs would need to be recouped elsewhere so Tenants would end up paying more.

“The Fees that agencies would be allowed to charge Tenants, i.e. default fees would be increased severely as the loss is attempted to be made up elsewhere.

“The ever-imposing legislation's and costs put on landlords would mean an increase in rogue landlords and a decreasing in rental properties as Landlords will not be able to cope with the financial burdens now being placed upon them.

“This bill has not been given the consideration required and I feel this is a knee jerk decision that has not been thought through properly and the aftermath of this is not going to be good for anyone and would have a detrimental effect on the people this is supposedly going to protect.

“I would greatly appreciate your time to consider the above as I am sure you can appreciate the negative impact that an outright ban will have.”