A meeting of the newly-formed Fair Fees Working Group is to go ahead today.
Separately, the Office for Budget Responsibility has said that the ban could lead to higher inflation – but that it won’t know until it sees the detail.
The Fair Fees Working Group was put together two weeks ago at the first meeting of the Fair Fees Forum, an initiative of the National Approved Letting Scheme.
The Group’s original brief was to explore alternatives to an outright ban.
NALS chief executive Isobel Thomson confirmed that the meeting will still be held, despite the out-of-the-blue ban on letting agent fees announced by the Chancellor on Wednesday.
Thomson warned only weeks ago that the industry was “sleep-walking” into a ban.
Thomson said: “We called it right and put our heads above the parapet.” She said she had received some hostile reactions as a result.
The Fair Fees Forum was held earlier this month, and was attended by agents as well as bodies such as Shelter and Crisis, plus two of the redress schemes although not TPO.
Today’s meeting will also be attended by agents, the same two redress schemes, the Residential Landlords Association and the Department for Communities and Local Government, which specifically asked to attend.
Thomson said: “The first meeting of the Forum was genuinely positive, with general agreement in the room that agents should be able to charge – reasonably – for services that benefit the tenant.”
She said that while today’s meeting may find itself with a different purpose to that first intended, she believed it important that representatives of the industry should meet and discuss issues, and keep the DCLG informed of their views.
Meanwhile, the fall-out continues from Wednesday’s announcement.
The Office for Budget Responsibility’s Economic and Fiscal Outlook document, published with the Autumn Statement, said that the ban could lead to higher rents and general inflation.
The document says: “The Government has … announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast.
“Nevertheless it is possible that a ban on fees would be passed through to higher private rents. If this is the case, it would also affect measured inflation, as CPI and RPI inflation both include rents but do not include the additional fees charged by letting agents.
“We will return to the implications of this policy for inflation once firm details are available.”
Industry veteran Harry Hill tweeted that in his experience, “Government intervention into the housing market almost always is a disaster”.
Meanwhile, Generation Rent hailed the ban as a victory for it and other organisations.
It said the ban was good news for tenants, as their agents “won’t have an incentive to try and replace you”.
I think they need to come out of this meeting not just wth the date for the next meeting, but with an agreed alternative suggestion. The government acted super quick on this ( when has that ever happened!). The response needs to be equally as quick.
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Let’s hope they can create a solid arguement that “services that benefit the tenant” should be chargeable,
for example. A reference, an alteration to existing tenancy
lets hope it’s not just some old pointless “cap on fees” discussion that whilst I would have supported it now seems redundant
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I know my head’s gone but the inevitable insurance tenants will be required to take out to rent from reputable agents and landlords will require a minimum premium of about £480 per tenancy just to cover one aspect of the insurance.
Congratulations to everyone who didn’t consider the consequences, you just shafted everyone but the insurance companies!
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To have an insurance you need a thing called ‘insurable’ interest. I’m not sure if a tenant paying to indemnify their landlord would qualify. ?
if it did, then that concept is a massive game changer and the law of unforeseen consequences will surely bite generation rent and shelter on the bottom.
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It already exist Eamonn; insurance that effectively buys the tenant the professional representation they ought to have and have no excuse not to have.
You disregard me as a fool, I’m not; idiots don’t win 43% market shares of an industry as big as the lettings and management industry without knowing and understanding the game at a strategic level.
Two products are already in place waiting for Tuesday announcement, insurance is the game changer to enure uptake of the more palatable option that simply drives the spivs, rogues and criminals out of the industry.
Hammond has put his name and reputation to legislative repercussions neither he nor the lobbyists who influenced him can even begin to contemplate.
Tenant verification costs will still be paid by the tenant but to someone who has a risk to considered , additional administration costs as well as profit to shareholders.
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So let me make sure I understand you. Your saying that there are two insurance products in place to be announced on Tuesday Is that correct..?
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Tenancy deposit legislation introduced in spring 2007 was that catalyst of change in the industry, the ‘agents’ who were making a lucrative living from deposits had to find other ways of making money that exceeds usual letting income.
My role within the industry is to predict what is going to happen and build systems to cope with change when it happens. I had 7 years prior notice of last Tuesdays Autumn statement simply because I had to map the consequences. The present head of sales for PSG will recall me predicting the 2007 house price crash as I sat in his back parlour 2 years before the crash came. When prices and sales volumes crashed came our ‘branching out campaign was waiting to help estate agents transition into lettings.
Since 2007 change has been inevitable. There are three ways forward,
1. The outright ban goes ahead in which case insurance policies will need to indemnify prospective tenants. That is the expensive route everyone should want to avoid. The insurance policies have been scoped out and costed albeit in brief, insurance companies don’t do accurate costings on risks they don’t understand fully.
2. There will be a workable middle ground solution found, perhaps a cap on fees that will control the likes of Countrywide, LSL and Foxtons, the firms whose excessive average fee structures seem to have been the evidence used to support the ban.
3. Mr Hammond will realise the unintended consequences on agents and tenants away from London and give up on the idea altogether. or the governance process will stop him)
Option 3 isn’t going to happen so someone has to provide the insurance system or the workable middle ground. I don’t do insurance so have concentrated on the compromise.
My head has gone Eamonn but only a few years down the road.
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If you watched Question Time last night, unfortunately those in power consider the OBR to be a negative bunch of Nay sayers, so dont hold out any hope that they will have any influence
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Someone has got to disclose where the evidence to support the ban has come from. Henry Pryor put me on to something last evening, he showed me how a firm seemed to know what the average fee was and what the % profit margin is.
Average fees are reasonably easy to make up from anecdotal evidence ( unsound for legislation) but to quote a % profit margin requires cooperation to disclose fairly intricate account details. Who know anyone who took part in the survey? when and where was it carried out.
If the data used to justify the ban is unsound or has been obtained outside ICO regulations Mr Hammond may well have laid a bear trap for his career and those who have fed him numbers.
Where did the data come from, it appears to differs by 173% from the average provided by ARLA
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Why else do you think we were told we had to make our fees transparent and list them every where we could (on line, in all adverts, in our office, in the toilets, on every Christmas card we write, etc ….?
I can’t comment on the % profit margin, though the assumption is most agents charge around 10% so it can be worked out (oh – wait – except for the agents who make up their fees by overcharging tenants, they charge around 5%), but the evidence of the fees are not anecdotal – they come from the agents ourselves.
The average provided by ARLA is that of ARLA agents only – and certainly in my area all but one of the agents charging excessive amounts are non-ARLA agents and the average is not far wrong.
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Where are you? if you are in Averageville it’s fine your average fees are the average, If you are London or thereabouts it suggests someone has rather carelessly forgotten that isn’t the national average.
In London blowing a grand on fees is something many won’t bat an eyelid at, they are happy to pay the likes of Foxtons, simply because they can afford to. It is those who are disadvantaged by others wealth who are doing the lobbying.
Doing away with fees only gives the wealthiest tenants more cash, it makes them a stronger competitor to those with less. Genuinely Hammond has been duped by something no-one has thought through properly.
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Who said I want to do away with fees?
And where I am is not important – you asked where the data came from – I replied!
This shouldn’t be an argument about class or wealth – it is about tenants being charged reasonably for work done on their behalf.
I am certainly not disadvantaged by other’s wealth, and so whilst I have not lobbied for fees to be abolished I have maintained we should have had the fees capped and unreasonable charges scrapped.
That was not because of my social background or my upbringing, it was because that is how fees SHOULD be charged. It is unreasonable to think any other way.
Also please think about your last statement.
Whilst I wholeheartedly agree that this, along with a lot of legislation, has not been thought out properly, doing away with fees makes property more affordable to everyone and will not alter the criteria for which I chose who is most suitable for the property I am letting.
You will argue that rents will go up – that will not affect the initial affordability of a house to rent and the market place will still be the main determining factor in how much the rents can be increased.
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In a supply and demand market increasing the amount everyone can spend benefits everyone, it doesn’t increase supply it simply benefits the wealthy as much as the poor.
You said the average fees are about right, I don’t want to know your address or postcode just some idea where a £350 tenancy fee is average, as you claimed. That gives an idea how flawed the data is that has been used to determine the change was necessary.
You might not be disadvantage by other people’s wealth but a public sector worker in London is.
Rents will go up irrespective of legislation on fees, Abolishing fees means Agents won’t vet tenants they’ll leave someone else to verify the tenant is suitable for the property and the landlord, but at the tenants cost.
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Just been trying to find where I said the average fee was £350!
The average fee David Cox recently quoted was £202 per agent – that is the fee to which I was referring – and in my area, which is Grantham, Lincolnshire, if it hadn’t been for one agent, the average fee for ARLA agents would have been much less than this.
As it is the average up front fee in my area is £312.29 for all agents (£359.33 for non ARLA agents and £227.60 for ARLA agents).
My fees are considerably less than both all of these.
It costs very little to vet tenants – I get the impression you do it in house and I will probably go the same route if all fees are eventually banned.
The thing is, I won’t be losing a lot so I won’t have to make a lot up from the Landlords for whom I act. My prediction is that those agents who have been overcharging will have to shift those fees onto their landlord’s commission/fees and I will have a better chance of being able to compete for the instructions.
The margin I lose in fees will be negligible compared with the fees I earn from new instructions.
And, if I don’t, I have already planned where I can cut costs to make the impact minimal (Goodbye On The Market – I tried to support you but it just wasn’t to be …!!)
I also have scope to increase my fees to Landlords and still be cheaper than many local agents.
I have a possibly strange business ethic where I make a profit, employ staff, but still manage to charge fairly and only charge the person for whom I have done the work, to both tenants and landlords, with no kick backs from other companies (such as contractors, insurance companies, etc).
OK, maybe I get the odd bottle of wine from clients at Christmas, but these I share out with my staff.
I know what you are saying about the London market, but the point I am trying to make is that we will never, ever win support by arguing this is a class or wealth dispute.
It is a dispute about fairness – pure and simple.
Tenants are being ripped off by some agents – absolutely no one can deny that!
If we, as a body, had seen the way the wind was blowing and seriously looked at our fees, tenants would have been happier (I can’t believe I just said that – how about applicants would have been happier!) and we wouldn’t be facing a total ban!
If there still a possibility, no matter how small, that a cap could be considered instead of a ban, we, as an industry, have to support the idea AS A WHOLE!
If they abolish fees the good agents will still vet the tenants – I used to do it in house many years ago and can easily do it again if needed. It is a cost I will be able to absorb if I have to.
I wait with baited breath to see how other agents will manage ……
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I am not an active agent Tim. I build the systems that power the industry, that requires an understanding of the whole industry and how it operates.
The £350 is a figure the lobbyists seem to have used to convince Mr Hammond of the ban, it is the average fee charged by Countrywide, LSL and Foxtons. which goes to explain why it is higher than your average, ARLA’s average and most other agent’s average.
The organisations that have lobbied for a ban on fees don’t represent people across the country they represent people in London and the commuter lands who are struggling to compete with tenants who have far more disposable income to afford an acknowledged restricted supply of accommodation. Foxtons charge a fortune because they can, their average tenant isn’t bu any imagination the same as the average tenant in Grantham or Barnstaple.
Generation rent is real people with real problems of affordability, banning fees in outside London isn’t going to help them.
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You say (or, at least, I think you are saying) that banning fees to applicants outside London will not help them – but whether it will or not is besides the point to a certain extent.
A fee should be a reasonable amount that is charged to the person who benefits from the work undertaken – it is as simple as that.
I will maintain however that banning fees will help all tenants. We have agents in Grantham whose fees are higher than the first month’s rent – that can’t be right! Banning fees will reduce the up front payments quite considerably.
And I do not believe rents will increase greatly as a result of banning fees, not that I am actually advocating banning fees you understand.
You have stated that capping fees as the most sensible compromise, which is what I am saying also.
It would be foolish industry indeed that saw fees banned and thought the answer was charge Landlords more and watch rent rise as a result. The risk of the Government then bringing in rent capping as the next set of legislation would be too great.
A capped fee for many of the local agents would mean we could absorb what little we did lose without having to charge Landlords any more, in turn making us much more competitive than the agents who will have to put their fees up to Landlords quite considerably.
The Landlords will shop around first and put rents up as a last resort.
And I don’t even need to cap my fees, I could abolish them and be alright. But I believe it is fair that a tenant SHOULD pay something.
I do not intend to hold my breath however that there will be any such compromise.
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Harry hill hit the nail on the head
“Government intervention into the housing market almost always is a disaster”.
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Too little, too late.
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Any legal brains out there who care to comment on the suggestion of a tenancy arbitration fee? A lettings arbitrator who acts for both parties and each pays a fee commensurate with the service they receive? It gives Phillip Hammond a lifeline over right to rent checks.
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Good point .. but then thought twice and not a good idea. At which point does it kick in, after the tenant has moved in or before. The latter won’t work and the former could end up being a nightmare. Keep the ideas coming.
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she believed it important that representatives of the industry should meet and discuss issues, and keep the DCLG informed of their views.
Maybe this is a wake up call for those that represent the industry. Shouldn’t they be seen and heard to be more proactive in regular consultation with Government and seen as a relevance or are they as suspected called to talk as and when the government wants their opinion which they seem to then ignore. A change of communication strategy is required by our industry bodies , proactive not reactive if this is the case? Many industries appoint lobby companies to work for them, if they feel overwhelmed by the idea themselves (or competent) so maybe worth thinking about?
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Industry bodies can only lobby for what their members want.
The ARLA members were all quite happy to argue that their fees were reasonable when they quite blatantly were not.
The sad. misguided fools thought all they had to do was display them and they could still charge stupid amounts for work for which the tenant should not even have had to pay in the first place.
ARLA could have insisted its members support a cap on fees, but no meeting is long enough to cope with THAT argument!
How many times have I said this over the last few days – Letting Agents are their own worst enemies.
The ones who overcharged will suffer the most. The ones who charged reasonably will easily make up the difference from the extra instructions obtained by there being a level playing field in the fees charged to Landlords.
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What meeting? Where?
Is ARLA involved?
David Cox has recently said we need to speak as one voice (to which I essentially replied that voice will not doubt be “meow” once they’ve been herded.
He is not wrong however!
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Robert may
Section 5n of the ombudsman code of practice states you cannot charge 2 parties a fee for the same transaction so the arbitration fee wouldn’t work.
Tim Hall
Many of the fees are reasonable so why would ARLA not support them. Do you run a lettings business? If so how will it be affected by the loss of tenant fees? I can tell you that there will be many staff cuts and the service that everyone wants will dwindle as a consequence. The ombudsman request that fees are displayed so you can’t say “the poor misguided fools at ARLA” because we are all guided by legislation and regulation and have to fall in line.
I’m a letting agent and I’m not my own worst enemy. If I don’t charge sufficient fees then I can’t run a business, my overheads will supersede the income and I would no longer be able to give good service.
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thank you for that, that’s a shame arbitration with mutual consent does away with duplicated administration costs and 2 profits.
There are actually 2 distinct services, I am fairly sure most tenants would lobby to pay an arbitrator rather than an agent of their own.
An agent who verifies their tenant worthy and indemnifies their tenant client against arrears, dilapidation and protracted eviction won’t be cheap.
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Votta583 – if you believe many of the fees being quoted are reasonable then, yes, I’m afraid you ARE your own worst enemy.
For a start define the word “many”
Secondly what level of fee do you consider reasonable? The average ARLA quoted of £202? More, or less? Because in my area there was at least one ARLA agent charging over twice the average amount.
David Cox maintained at meetings, and in his recent interviews, that the only reasonable fee to charge a tenant was for referencing, the tenancy agreement and inventories, though in discussions I have had with him we have struggled to think of a benefit to the tenant for having a reference and an inventory.
In my mind the only part of the whole process of letting the property that benefits the tenant (i.e. is in the best interests of the tenant) is the tenancy agreement.
You cannot argue that the tenant benefits from references – it is the Landlord who instructs we obtain them and the tenant would be better sometimes if we didn’t.
You cannot argue that the inventory protects the tenant – without an inventory a landlord will find it impossible (or at least, shall we say, incredibly, almost impossibly hard) to prove any dilapidation/missing items at the end of the tenancy. It therefore benefits the tenant to NOT have an inventory.
The tenancy agreement however protects both the tenant AND the landlord – both benefit from this.
I do run a lettings business.
I have a sneaky feeling the ban will be good for my business.
I have lost count of the number of threads I have posted on, but I think you know why I believe that my agency won’t suffer – I never charged that much in the first place, only ever charged for work done, and only charged what I thought was reasonable for the tenant to pay, not what I could get away with s I could reduce my commission to the Landlord.
The displaying of fees was made law in Section 83 of the Consumer Rights Act of 2015 – the Ombudsman is merely trying to make sure we, as agents, comply with the law.
Why one earth did we think that making our fees transparent would make any difference?
ARLA told its agents to look at their fees and make sure they were reasonable. How many actually did that? Did we really think that, by just displaying our fees, it would do anything other than give the ammunition to the likes of Shelter and other organisations that they wanted?
If we, as a body, had seen the way the wind was blowing and seriously looked at our fees, tenants would have been happier (I can’t believe I just said that – how about applicants would have been happier!) and we wouldn’t be facing a total ban! (yes, I did just write that on another thread above – it is very much relevant here also).
The sad, misguided fools are the ARLA members, not ARLA, and I most certainly can say that – hence why we are now facing a ban on all tenants fees.
If your overheads supersede your income I think what you meant to say is that your business will be insolvent and will have to close – which, of course I do accept, will drastically affect the service you will be able to give. Were you above or below the £202 ARLA average? Is there a figure you could work to which we all could agree on and suggest as a capped, one off charge that tenants might find reasonable?
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Has the Government thought about all the VAT they will be losing with this ban on Fees!!!
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Ok! Clearly there is an issue with how some agencies go about making their money. The problem is that the minority have caused a problem for the majority and the likes of ARLA have not been able to articulate why there is a need to spread the cost across both landlord and tenant.
There are agents out there that try to win the instruction based on a low fee and ramp up the tenants costs to recover the shortfall. Regulation of this in the form of a cap would have been far more sensible and would have created a more level playing field.
Fees for work and services need to be paid for, admin fees on top of this or that are excessive, is wrong.
But remember, the tenant is party to the agreement with the landlord and are signing a legal document. They need the agreement that we provide as much as the landlord needs it, both are engaging us for services. The landlord maybe instructing us to find them a tenant, but the tenant is instructing us to find them a property and that requires time and effort.
Landlords don’t just come to us, we have to advertise and PR ourselves, put in the groundwork to get the properties on, this costs money and we do that so we have something to offer tenants that come looking to engage our services. All the work done with a tenant is done at risk and we lose money on all the tenants that do not take a property with us.
We operate in a free market, tenants can shop around and decide if they want to use an agent or not, that choice has always been there. They can even go direct to a landlord if they want, however the majority want the security of using an agent as the majority of decent landlords (not all) use an agent and a decent agent should also have a tenants interests at heart, protecting their deposit being just one. Tenants are not stupid, they can work out using certain agents is going to be riskier than others.
This is simply using a sledgehammer to crack a nut.
There will be consequences for this and the cost will have to be covered by someone. Whilst I do not think it will be solely tenants, there will be additional costs to them in some form.
Where an agent provides free services to tenants for their time, I think that there will be a focus on being paid for that time now.
I can envisage scenarios where agents ask;
How much to drop off keys to a tenant that has locked themselves out of their property?
How much to provide a reference (not everyone charges this, me included)?
How much to provide documentation / evidence in a dispute a tenant is having with a landlord?
How much for advice that is currently provided for free?
How much for missed appointments?
How much for late rent? (this is in a lot of agreements, but many agents don’t enforce it)
In relation to right to rent, a cost that is picked up by the agent or landlord, I see this becoming a justified charge. If we have to verify that a tenant has a right to rent, then the tenant needs to cover the cost of the time taken to do that. Remember the landlord doesn’t want to know the tenant has the right to stay, the government do!
The list goes on.
Most decent agents will be fair and not charge for many things, including the list above, even though they have a real value attached to them, as it is seen as part and parcel of offering a decent service to all clients.
The consultation process should and will have to deal with issues such as the check out. How will this work in reality? The check out is there to protect the tenant as much as it is the landlord. If it transpires that a landlord has to pick up the cost of both or has to pay for one, in the event of a tenant refusing at the end of the tenancy, how can that be impartial? Surely there will be undue influence on the clerk to produce a report that is in favor of the landlord, the paying customer?
Where does this end?
In every type of business there are fees for administration, providing documentation, writing letters. Why has the government targeted the lettings industry?
If this is truly about administration fees, then surely every industry should now be looking over their shoulder?
Mortgage companies, banks, car hire, holiday booking, arrangement fees, card fees, ticket fees, booking fees etc etc.
£1250 for permission to let from NRAM, the bank spawned from the banking crisis and once owned by the government!
If you go digging there will be plenty of instances where fees can be challenged and are much more outrageous that lettings fees.
Is it even legal? As someone rightly pointed out on here, the government confirmed it was not their place to interfere with private business when it came to Boxing Day opening hours, yet, they feel quite it is right to interfere with private business when it comes to setting what they can and can not charge.
Landlords are under attack yet are being asked to fill the void of the housing shortage.
Landlords and agents are asked to be boarder police and fill the void of our understaffed and under resourced immigration services.
Agents are asked to collect tax and report to HMRC to fill the void of our understaffed and under resourced Tax Office.
Agents are asked to police money laundering and face prosecution if they make an honest mistake.
Landlords are being asked to pay more tax because they are not afforded the tax relief that any normal BUSINESS would be afforded.
All I asked, is who is paying for all this?……..
Regardless of your view on the merits of tenant charges, its a dark day when the government tries to run the private sector!
Regards,
Paul
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