Landlords who self-manage their properties could do a better job than letting agents, a tenant fees ban campaigner has told MPs.
Giving evidence to the Communities and Local Government Committee yesterday, as it continued to examine the Draft Tenant Fees Bill, Dan Wilson Craw, interim director of Generation Rent, said that the extra competition among letting agents created by the fees ban meant he did not expect them to pass the full cost on to landlords.
He said that it would give tenants extra clout in the market so that they could move to cheaper homes if a landlord tried to raise the rent, and that landlords would also fix problems more readily because tenants could move out more easily.
When asked if he welcomed the idea that the ban could also lead to more landlords self-managing properties, he said: “The English Housing Survey looked at satisfaction rates for tenants who had paid a fee at the start of the tenancy and those who hadn’t.
“We might assume that those who hadn’t paid a fee aren’t renting through a letting agent, and they were more satisfied with their tenancy by about eight percentage points.
“I am not sure that is something we can apply to the post-fee world but it suggests that there isn’t a huge difference in quality between self-managed properties and agent-managed properties. If anything, landlords who manage properties directly do a better job.”
But he conceded: “Clearly there is a role for agents when a landlord isn’t living nearby.”
His view that the costs of the fees ban wouldn’t be passed on to tenants was echoed by Mette Isaksen, policy researcher at Citizens Advice.
She said: “Assuming that the legislation effectively bans fees and there aren’t loopholes written into the wording of the legislation, we would anticipate that tenants will save hundreds of pounds over the time that they move. The average fee that a tenant pays to a letting agent is £400, according to our research.
“Because landlords are able to shop around for their agent and move if they are paying too high a price or receiving poor service, we’d expect for the letting agents to have to compete more actively for that work, whereas at the moment, tenants are forced to use whichever agent happens to have the property that they wish to be their home.
“So we’d anticipate few letting agents will be absorbing the vast majority of this policy as a result of this competition.”
However, she expressed concern that a clause in the Bill relating to default fees created the potential for agents to find other ways of charging fees.
She said: “Our broader concern is how letting agents or landlords could abuse this clause once the legislation has been passed. By its nature if you can add a condition and attach a fee to it, that leaves the door open for a wide range of fees.
“We think it would be possible for example for inventory fees to be charged within it and we think renewal fees and exit fees would be particularly difficult to make sure they aren’t charged as a result of this.
“The default fees clause has the potential to make the lettings market less transparent and just shift fees from an upfront cost to something that is embedded deep in your tenancy contract, so we are hugely concerned about the impact of it.”
David Smith, who appeared in his capacity as new policy chief at the Residential Landlords Association (RLA) but who is also a partner at law firm Anthony Gold, said that there were loopholes in the legislation but that it was a draft Bill and that in his view the clause on default fees was actually well drafted.
On the matter of fees, he said: “The first point I would make is that the CLG said they wouldn’t allow the situation that has occurred in Scotland to happen which is where all fees are post-loaded.
“Fees are still charged in Scotland. I don’t know why people think they aren’t but they are just post-loaded so tenants don’t pay for check-ins but they do pay for check-outs.
“If you want to get a reference for your next property in Scotland then you can expect to pay for it from your existing agent so I expect many people will do the same thing here.”
He also cautioned against treating the entire private rented sector as if it were the same.
He said: “I have agents who get 5% of their turnover out of fees. I have agent clients who get 30% of their turnover from fees.
“If you take 30% of your turnover from fees then you have got two choices, and one of them is going out of business so that is probably not a realistic choice.
“So the money has got to come from somewhere and it will come from landlords or it will come from loopholing in the Bill, or it will come from both in reality because it is almost impossible to write a piece of legislation that doesn’t have a loophole in it.”
Adrian Jeakings, chairman of the National Landlords Association (NLA), echoed Smith’s point.
He said: “Banning upfront fees means they will probably pop up somewhere else or some people are going to go out of business.
“It could lead to reduced competition among letting agents in certain markets. It could also reduce the quality of service that people get from their agents and it could lead to increased rents.”
On the issue of self-managing, Smith said that landlords generally chose agents for a reason and that many of them did not have the expertise to do it themselves.
He said that MPs’ time would be better spent concentrating on changing the way in which deposits work.
He said: “Our view on this Bill is that it is almost certainly not a particularly effective use of Parliamentary time.
“We would much prefer something to be done about the deposit situation. The reason why tenants often don’t pay the last month’s rent is because they need to have an extra second deposit for the next property and the first month’s rent.
“We think the time has now come to convert the existing tenancy deposit schemes around, get them to hold tenants’ deposits for tenants, rather than for landlords, and to provide a guarantee to landlords that they are holding that money and then to have a small insurance scheme that covers the transition period.”