Government could curb deposits as well as impose outright ban on tenant fees

The Government has received widespread criticism following the long-awaited release of its consultation paper on banning tenant fees.

The much-anticipated document was finally released on Friday and immediately drew industry concern as it appeared to try to go further by suggesting measures beyond just banning tenant fees.

The document shows that the Government intends to legislate that no agent will be able to charge tenants any fees, premiums or charges that meet the general definition of facilitating the granting, renewal or continuance of a tenancy.

But the  consultation also goes further, suggesting the Government is considering introducing caps on deposits or the way they are paid.

ARLA Propertymark has vowed to launch a campaign providing agents with the resources to have their voice heard on the lettings fee ban consultation.

The group messaged members to encourage them to respond to the consultation before the June 2 deadline. Members are also being advised to attend workshops being run by the Government in London, Birmingham, Manchester and Bristol.

David Cox, chief executive of ARLA Propertymark, described the Government’s housing policy as shambolic.

He said: “The consultation contradicts the Government’s already stated aim to encourage longer-term tenancies.

“Independent analysis launched at ARLA Propertymark’s annual conference revealed that if an outright ban was introduced, rents will increase by £103 per year which will only serve to financially punish long-term tenants.

“We urge the Government to use this process to think again to ensure that consumers, and the wider economy, are not penalised by contradictory government policies.”

His views were echoed by Richard Price, executive director of UKALA (the UK Association of Letting Agents), who said: “While we’re pleased the Government listened to our suggestion to exclude holding deposits and in-tenancy charges from the scope of this ban, the fact cannot be ignored that it will seriously affect our members’ ability to run their businesses.

“Small agents in this market are drowning in constant policy interventions. The publication of this consultation in isolation, at a time when we’re awaiting further proposals on requirements for all agents to hold client money protection insurance, is proof that this Government does not have a clear vision for the future of the sector.

“If they really want to completely regulate letting agents, then why waste time by constantly moving the goal posts?”

The National Approved Lettings Scheme (NALS) was equally scathing.

Isobel Thomson, chief executive of NALS, said: “The proposals are an unwarranted attack on good landlords and professional lettings businesses.

“We want to see a fair, stable private rental sector for all, but this is not the way to achieve it.

“The measures are a misguided attempt to help tenants which will only serve to hit the most vulnerable and make their access to the private rented sector even less attainable.

“We believe the implementation of a fee ban will drive the charging of fees underground which inevitably weak enforcement will fail to pick up.

“NALS has very real concerns that this will place intolerable pressure on smaller agents. There are no winners in this proposed move by Government.

She urged all agents to contribute their views and said NALS would continue to engage with the Government through the Fair Fees Forum.

Landlord groups appeared just as angry as the lettings agent bodies.

Chris Norris, head of policy at the National Landlords Association, said: “Yet again the Government has published plans to tackle a particular element of the letting agency market, whilst at the same time suggesting other areas that they ‘might’ like to look at in the future.

“It is about time that landlords and agents were given some certainty about the market’s regulatory future – which could be easily achieved by agreeing an over-arching system of regulation for letting agents once and for all.

“We’re particularly concerned that the scope of this consultation appears to have drifted to include tenancy deposits, with suggestions that a ‘cap’ may now be necessary.

“This looks like yet another attempt to affix a sticking plaster to a perceived problem without really understanding what is driving behaviour in the real world.”

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15 Comments

  1. Will

    So they have a consultation, IGNORE IT and do what they intended to do any way. At least Government is transparent you know they will ignore any so called consultation. Such a shame.

    Let us all hope that Brexit keeps their little minds occupied elsewhere the next couple of years!

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    1. Bless You

      My hat goes off to letting agents. Thankless job with no support from anywhere. 
      All you do is help people find a house and take the Sh*t from naive landlords and horrible tenants..
      You should be getting medals not pay drops. 
      Propanda and populism are terrible things..#brexit life. 
      bless you all … 

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  2. ajayjagota75

    As predicted tenancy deposits are now in-line for reform.

    Agents who have part of the £2.3 billion in their “client accounts” need to prepare for change!

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    1. Ding Dong

      Why AJ? 
       

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      1. ajayjagota75

        The government seemed to have accepted that affordability is an issue in the PRS and as such are looking to reduce costs for renters entering/moving within the sector .deposits on average being 1.5 times the monthly rent are generally accepted as the largest cost for renters to bare 
        Deposits represent on average 1.5 times the monthly rent and seen as the largest cost to renters.
        Figures from the scheme administrators show that 97% of deposits are returned undisputed.
        NO effective way of policing the £2.3 billion of “insured schemes”  of deposits that should be in “client accounts” – as highlighted in numerous cases of agents misappropriating tenants deposits.
        First steps may be all deposits become custodial which i have written about here : https://www.linkedin.com/hp/update/6257069851903303680

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        1. Ding Dong

          like scotland…totally agree on only custodial schemes…actually we should only have one, then there is no need for prescribed info, as everyone would know where a deposit is being held.
          not seen anyone use your scheme though AJ, so assume the offering cannot be that attractive?
          Personally, I think I am going to stop taking deposits now, and think about other ways I can protect my landlords and my agency moving forward. (to reduce costs and paperwork in my office)

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          1. ajayjagota75

            Hi, we have a number of agnets now using the scheme including a national – think again as our “offering” gives the Agent/Landlord protection that includes rent gauarantee Plus damage protection Plus legals including court costs.
            Happily discuss further http://www.dlighted.co.uk  

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  3. Eamonn

    I wish ARLA would stop this dead arguement that a fee ban would increase rent.

    if it does increase by £103 per year the government will still see that as a saving against fees charged today.

     

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    1. Votta583

      its not a dead argument it’s a FACT look at Scotland. In one week alone I’ve registered 30 tenants who’s landlords are selling and another 10 whose landlords have already increased Rents dramatically in readiness for the ban. So I would say it most certainly isnt a dead argument at all that’s living proof that the ripple effect has begun 

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  4. FromTheHip64

    “rents will increase by £103 per year which will only serve to financially punish long-term tenants”

    That’s hardly an argument against the ban, you’d find that in loose change down the back of the average sofa. Quoting figures like that don’t help the cause. If anything those figures are saying there’ll be virtually no increase….it won’t make a differnece to rent amounts. Not helpful to those against the ban.

    But irregardless, the ban’s going to happen and is long overdue. Time for letting agents to start charging the person they should have been charging all these years…..the client…the landlord.

    Have a good day!

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    1. Woodentop

      Can you explain how a letting agent can charge the landlord?
       
      This is a daily event with 10 people apply for a tenancy. 9 would normally fail as tenants from hell but until referenced we have no idea. 8 of the 9 immediatley back-off as they would be wasting their own money, everyone wins with no costs and tenant from hell goes off and tries to find another unsuspecting landlord and normally finds one who doesn’t reference!!!. This is why tenants fees work.
       
      That leaves us to pick from the 2 applicants left. We choose to reference one, hoping its the one good one. They fail on references (often affordability) and we go for the second. Lets assume they also fail on affordability. We have no tenant and need to find another one. So far, you suggest that the landlord has paid for two failures (there would be at least a third cost). Now put into the conundrum that the 8 from hell who had nothing to loose with an application, so all ten failed references. Do you realy expect a landlord is going to pay for failed tenants costs, when the tenant is actually the one that is causing the problems often from lying! You wouldn’t if you were the landlord @ £1,000 for example. The issue is the over charging agents who have taken in  £350 – 400 per applicant.

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    2. Votta583

      FromTheHip64
       The increase in rent isn’t an argument it’s a statement.  Take a look at the PRS  Report .  I’m guessing from your comments that you currently aren’t an agent because you always seem to say the same thing on here . “Charge the client”   And my response will always be the same to you “THE CLIENT WILL NOT PAY”  are you aware of the tenant tax?  Type in on Google and do some research .  There is no way on earth the landlord will want to stomach the cost of additional set up fees  which the tenants won’t be paying.  In fact so many landlords are already selling up their investments  therefore we shall see a Decrease in supplier of rental properties,  rents rising , poorer service given,  Job losses,  less money going into the economy,  an increase in online agents I could go on and on…..
      come on FromTheHip64  you need to keep up with what’s happening……

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  5. jeremy1960

    This isn’t consultation at all, it’s realistically just government going through the motions, every question is based on the ban happening with no real alternative.

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  6. RobMills21

    I agree with above, Jeremy is quite correct.

    However, as I have said before, we need ‘Regulation’ across the board and run by people from the industry who know what they are doing. You cannot expect something for nothing so tenants should have to pay a small fee but not over the top like some agents do!!. Insurance brokers are allowed to charge a administration fee and also receive from the insurance company, Whats the difference, they are paid by the policyholder and insurance provider just like tenant and landlord!!. The FCA approve this.

    Also, have they forgotten about the VAT income?

    At the end of the day it will happen one way or another, you need to ADAPT. If you are a good Letting Agent with a strong business then this should be a medium size wave, rather an Tsunami. Do most things in house. The people who are also going to suffer are inventory companies, reference providers as you can do all this in house as long as you know what you are doing!

    And don’t forget those agents who rely heavily on fees from ‘tenants’ wont be around for long if this goes ahead, so where are their landlords going to go!!

    One thing I have learnt over the years is DO NOT PUT ALL YOUR EGGS IN ONE BASKET!!!

     

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  7. Woodentop

    The solution, first months rent covers what the costs and deposit would be. The tenant isn’t paying anymore, just not going to get back what would have been a deposit, but no longer as it is rent.

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