Charges on tenancy agreements signed before fee ban could still be allowed, says ARLA chief

Letting agents might still be able to charge for tenancy renewals one last time even after the fees ban starts, ARLA boss David Cox claims.

However, the ARLA boss said he is calling for more clarity to avoid a “PPI moment”, a reference to the millions that have had to be refunded in the mis-selling scandal in the financial sector.

Speaking at Rightmove’s Legislation Live event yesterday, he told agents that the Draft Tenant Fees Bill allows for transitional provisions, meaning that existing contracts before the ban will still be legal.

He said this means if a tenancy agreement signed before the ban contains a charge for renewal, this could still legally be charged even if the contract ends after the ban comes in.

However, any new tenancy agreement written after the ban could not include such charges.

Cox said the transitional provisions will also help agents in the student lettings market as they could still legally charge fees to those who are signing agreements in the coming months even if they end up moving in during the next academic year in October when a fee ban is expected to be in place.

However, he warned that the Secretary of State has powers to change these provisions and told agents it is important to keep up to date with the legislation.

Cox is also calling for more “regulatory certainty” over charges for breach of tenancy. He says the Bill suggests charges for breaking the tenancy agreement would be allowed, but he told the conference, and later confirmed to EYE, that this had to be made clear to stop later claims against agents similar to the payment protection insurance scandal.

Cox said: “We are asking for regulatory certainty to avoid an industry PPI moment.

“On something as fundamental as breach of contract, there should be provisions to give legislative certainty.

“A default clause is commonplace in all other contractual agreements.”

He recommended agents to prepare for the ban to come in during next October, but said it may not actually be until April 2019 due to other issues such as Brexit.

Cox also suggested agents flip who pays for inventory check-in and check-out as it will be illegal to charge tenants an exit fee once the ban comes in.

Meanwhile, NAEA chief executive Mark Hayward told agents at the conference that Trading Standards was becoming more concerned about compliance with consumer protection regulations.

He said agents must be more transparent and ensure all property information is disclosed, particularly when it comes to leaseholds due to ongoing concerns over ground rent charges.

Hayward also said officials such as those from HMRC and the National Crime Agency wanted to see better anti-money laundering compliance and more use of suspicious activity reports.

He said: “The housing minister has a desire for more transparency.

“Life in terms of legislation is going to get tougher.”

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9 Comments

  1. cybelex

    I joined the Rightmove event online yesterday and when I heard David Cox advising agents how they could ‘get around’ the legislation I was disappointed. If their trade body is actively advising agents to thwart the regulation, it is no wonder they have the poor reputation that they do – they are being badly advised. This is not the way to change the public perception of agents and demonstrate their professionalism and integrity. It was also interesting to hear that the impact in Scotland may differ to that in England due to the level of fees charged; according to David Cox the average fee in Scotland was around £50 compared to the average in England of around £200.

    I get that the fee ban will have a negative impact on agents’ bottom line and will affect tenants in perhaps an unintended way. A realignment like this was always going to be painful but the fact is the landlord chooses the agent and if the tenant wants the property they can’t ‘shop around’ on fees; the ‘free market’ therefore was never going to naturally keep fee levels in check. The best agents are already changing their business model and getting ahead of the game, not trying to circumvent the system. We don’t always have to like what happens, but sometimes we do just have to accept it, and with good grace.

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    1. Robert May

      What was the suggestion put forward by Mr Cox?

       

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    2. HonestAgency

      cybelex

      I was also online yesterday and I didn’t hear David Cox do any such thing! Could you elaborate?

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      1. cybelex

        David Cox said that under the proposed transitional arrangements, agents could still legally charge a renewal fee after the ban comes in if a tenancy agreement signed before the ban contains a charge for renewal. That may or may not be the case, but it certainly is not in the spirit of the legislation. He also suggested that agents ‘flip’ the charges for the inventory and check-in/check-out and this would mean they could still charge these if the tenant paid the check-in before the ban and the landlord paid for the check-out afterwards. This is as Marc Shoffman has accurately reported.

        Again, the best agents won’t do either of these as it gives tenant organisations ammunition and gives credence to the argument that some agents lack integrity and the ability to act ethically.

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        1. jackoTLG

          Why wouldn’t he suggest such things? Its about understanding the legislation and working to it. His advise was sound.

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          1. revilo

            What he suggested is perfectly legal and perfectly reasonable – a bit like buyers completing before or after stamp duty changes!

            We are not a charity after all 😉

             

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        2. HonestAgency

          Cybelex

           

          As I thought, you owe David Cox an apology. As you state “agents could still legally charge a renewal fee after the ban comes in if a tenancy agreement signed before the ban contains a charge for renewal.” He is stating what you can legally do and rightly so. You quote the “Spirit of the legislation”. This spirit will see 1000’s of redundancies and increased rents. Its a vote winner, lets not kid ourselves other wise. Its coming we know that but until that time we will continue to charge these valid charges.

          With reference to the check in & check out charge switch, lets be honest, even with a massive portfolio the income on this one off charge is next to nothing. It will probably just cover an hours worth of the lighting, heating and staff time that we offer when tenants come in to our premises to seek our advice and guidance on renting all free of charge !!

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  2. ChippyJames

    I have to agree with Cybelex that David Cox definitely talked about agents looking for a work round and he could have been far clearer about saying that was wrong.  It is bad for the industry when the body that is meant to be pushing standards, fudges an issue like this.

    The government knows now that ARLA is not there for the consumer, its for its members (and doesnt do that very well either).  Therefore they are still inviting ARLA in for talks but will then pretty much ignore everything ARLA says.

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  3. Essjaydee51

    cybelex, I wonder if your accountant helps save you tax against your earnings and potentially that of your company, if of course you have one although judging by your comments I doubt it because of course that wouldnt be in the spirit of paying your share ie helping your profits just like the rest of us will be trying to do and help save someones job in the process!

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