A significant number of lettings agents in Scotland are forecast to go to the wall as the result of a twin whammy.
First, they are under pressure from the charity Shelter Scotland’s Reclaim Your Fees campaign, aimed at helping tenants reclaim fees from their agents. Shelter insists that up-front fees such as ‘administration’ fees and reference checking fees are illegal.
One tenant, Scott Kuku, has won his case in the small claims court against an Edinburgh lettings agent to whom he had paid administration fees. He has since urged others to follow suit and Shelter believes at least 60 others in the city are set to do so.
The Scottish government has just finished consulting on the issue of tenancy fees, and is likely to clarify the law – and, say campaigners, put a clear ban on all tenancy fees in future.
Graeme Brown, director of Shelter Scotland, said: “We want the Scottish Government to explicitly clarify legislation to make it clear to tenants, landlords and their agents that all charges above rent and a reasonable deposit are unlawful.”
But the second whammy facing Scots agents could be a tsunami – the new tenancy deposit protection legislation coming into force this summer.
This will be retrospective, meaning that Scottish agents and landlords who have already taken deposits for ongoing tenancies will have to hand the money over to an approved tenancy deposit scheme
In England and Wales, when tenancy deposit protection was introduced, it applied only to new tenancies created after a certain date. That is not the case in Scotland. Moreover, in England and Wales, insurance-backed protection schemes are allowed, meaning that actual cash does not have to be handed over at all.
In Scotland, insurance schemes are not allowed. Thus, actual money must be handed over for banking, prompting fears that the change could force some letting firms and landlords out of business, if they have been relying on the money for cashflow.
The big question is – will they disappear into the night, taking their tenants’ money with them? If so, was this possibility considered by the legislators, or could it be an unintended consequence of good intentions?
Furthermore, if the letting firm disappears or folds, will aggrieved tenants hold their landlords responsible and pursue them in the courts for their money?
John Blackwood, director of the Scottish Association of Landlords, agrees with this scenario.
He said: “We suspect that a lot of small agents will simply disappear because they haven’t been able to make sufficient provisions for the deposit scheme.”
Comments
Hey would you look here. Another bunch that must have taken the lead from our esteemed housing minister.
They should all bugger off and get a real job instead of living off the state as government wasters do. I think if they were treated as DSS people when they wanted to rent a property for their stays to do government business they would learn what it's like in the real world.
They must get up each day thinking who can they upset today.
Look on the bright side it may all get treated like the VAT on hot pasties and be withdrawn when they see the error of their ways, after all that's what happened to HIP's!
Two separate issues here:
1) Fees: The most positive spin I can put on Shelter's campaign is to say that its misguided and naive. Its true that a small number of agents charge high fees and provide poor service, but do Shelter really think it would be better to drive letting agents out of business and leave tenants dealing directly with landlords, some of whom are very good and some of whom haven't got the foggiest about their responsibilities? Or are Shelter so naive as to think the landlords will pay extra to cover all the letting agents costs?
2) Deposits: The phrase "Agents using deposits for cashflow" is a wonderfully nice way of referring to agents who have propped up their business and / or lifestyle by stealing tenants' deposits. If those who have done this are about to be caught with their pants down then excellent. I wish the same would happen to those who are doing the same thing in England
. I agree though that in the short term there will be plenty of landlords and tenants out of pocket which is going to create some serious fallout.
Relying on money for Cash-flow. Really??
THIS is the reason The Government wont regulate. If they did, 1000's of landlords (aka voters) would lose money.
Voluntary regulation is designed to minimise these possible losses by reducing number of bad boys.
There are alternatives to Insurance based Deposit products such as the Smart Deposit Warranty that FCC Paragon offer. I use it for all my tenancies and I have never had a problem. Simple to use and claim.
Well said Ray. How can a letting agent provide a top quality service without charging the appropriate fees. It costs money to professionally process a tenant's application, confirming things like affordability, finacial track record etc. The lettings market in Scotland works well, government interference will result in tears, it often does!
Leave well alone and allow the market to work, customers have choice, they don't need to use agents who charge excessively....
Landlords also have choices, they will work with agents who attract quality tenants and let their properties quickly. Any tenant who cannot pay a fair application fee to take occupancy of an asset often worth well over £200k should be challenged. For most private landlords property is an investment, not a charity. Shelter don't seem to understand. They should raise capital and buy houses, then try and operate without appropriate fees and market rents, it wouldn't work for them and is doesn't work for landlords.
"Graeme Brown, director of Shelter Scotland, said: “We want the Scottish Government to explicitly clarify legislation to make it clear to tenants, landlords and their agents that all charges above rent and a reasonable deposit are unlawful.”"
So, who pays the costs? You?
If it is the Landlord (in addition to his share) rents will go up.
Administration costs, so, who pays?