Letting agents’ fees ban: Industry bodies continue their fight

ARLA has called for an end to up-front fees.

Instead, it is asking for the fees charged by letting agents to tenants to be spread over a six-month period.

However, ARLA managing director David Cox has conceded that the Government seems set on a full ban.

He also says that the Government is unlikely to offer a cap on fees, as that would be a climbdown from the outright ban announced in the Autumn Statement.

Meanwhile the Fair Fees Forum – launched by NALS – has re-stated its call for an review of the lettings industry, including its fees, by the Competition and Markets Authority.

New research among just over 1,000 ARLA agents reveals that 42% expect a full ban would result in reduced staff numbers, and 62% think that a full ban will cause the quality of rental properties to decline, with 61% expecting property management standards to drop.

ARLA is arguing that spreading the cost of fees, rather than banning them entirely, letting agents will be able to maintain current service levels to tenants.

The spreading of fees will also make tenancies more affordable to tenants, says ARLA, as it means they will only need to find the deposit and the first month’s rent.

ARLA also says that by keeping fees in place, landlords will also benefit and will not face higher costs at a time when they are already facing much tighter levels of regulation and dramatic rises in tax.

ARLA’s research shows that letting agents overwhelmingly expect rents to rise if a full ban comes into force.

ARLA managing director David Cox told EYE: “Despite consecutive housing ministers telling us that they don’t want to ban fees, the Government now has its heart set on doing just that.

“This is in the belief that this will improve competition and give renters greater clarity and control over what they pay.

“In order to mitigate the effects on agents’ businesses, property standards and rents that we know would happen from the research we have done with our members, we have to explore other options.

“All the signs are that the Government has no intention of capping fees and in any case it would be a climbdown on what was said at the Autumn Statement.

“Furthermore, if a cap were introduced it would more than likely be much lower than what the industry expects.

“Every agent charges in a different way so our option will allow agents to continue providing a high level of service whilst consolidating charges into a single, monthly payment – allowing tenants to see exactly what they will be expected to pay and make it easier for them to compare agencies.”

A spokesperson for the Fair Fees Forum said: “ARLA’s latest proposals were circulated to the whole Forum and feedback is now being assessed.

“Initial indications from members seem to favour continuing with the actions outlined in our last communication on January 13.

“In short, this is to prepare a paper ready to request a CMA review into fees and charges in the lettings industry and to meet again once the consultation into the fees ban is launched.”

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37 Comments

  1. bigplayerinthegame74

    Estate agents have taken advantage of what they charge tenants and in doing so they have shot themselves in the foot.

    People say estate agents will have to increase their fees and in turn the landlord will increase rents. This will not be the case as Landlords will turn to the online agents who don’t need to higher their fees.

    If this full ban goes through then the high street agent will die a slow death.

     

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    1. MarkRowe

      Calling yourself ‘big player in the game’ oh dear… every word you’ve written above is also utter tosh.

      ‘Taken advantage’ – we (estate agents) charge for the services we provide and make a profit… because we’re businesses. I think you’ll find it’s online agents/lower cost models, who are ‘taking advantage’ of investors cash to keep themselves a float. So I can’t see online agents suddenly taking over the world. Read the first story on PIE today.

      In terms of a slow death. Anyone who states glowingly that someone or something is going to die a slow death is disgusting.

      The majority of agents are very good, honest and hard working in this industry. I suggest if you want to remain a ‘big player’ you take a look at your approach. Perhaps even get some facts behind you to back up your ‘big player’ comments.

      Have a good day, Sir!

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    2. Eamonn

      Big player.  A bit early to be saying that type of nonscene.     But then I think you already know that and just want to sound like an antongaist,

      FYI The  ban in Scotland hasn’t seen online agents rise supreme in the highlands.  This would suggest to me that your idea that landlord will run to on line agents Is premature.

      i hope your comments is the only premature thing you have to deal with.

       

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  2. AgencyInsider

    If this full ban goes through then the high street agent will die a slow death.

    In the words of an old tennis player: You cannot be serious?!

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    1. bigplayerinthegame74

      Very serious

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      1. inthefield

        Hogwash bigplayer. I think there will be some casualties yes but any decent agent has already got plans in place to counter this.

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        1. bigplayerinthegame74

          Apologies my name should be “thebiggestplayerinthegame’

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          1. letmeout

            thebiggest******inthegame?

             

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          2. Mark Walker

            @RealDonaoldTrump – is that you?

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            1. mrharvey

              I’ve seen ironic comments, self-effacing ones, rude ones, useful ones and frankly nonsensical ones in my time on PIE.

              Yet I can’t work out if this guy is being serious or not. Nobody is this boastful without it being a joke, right?

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              1. drakeco75

                If you ask most women the ones who brag the most perform the least…

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  3. eltell

    Perhaps some of our Scottish colleagues could truthfully enlighten us how they have survived the fees ban and the true cost to their turnover.  Trouble is that to attract new landlords in an ever competitive market place letting agents have cut fees to landlords from the 15% norm in the nineties to the un-sustainable rates today by subsidising income with tenants fees.

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  4. wayne

    I’m a small family run estate agent and have plans in place we the ban comes into play in regards to rents 99% of my landlords have already instructed a rent rise come April an average of £20 per month

    If tenants wish to rent why not pay for application fees ?

    when I brought my car I had to pay £180 application fee when you take a contract mobile out you pay application fees

    when you BUY a house you pay an application fee

    so why single out the rental sector I will tell you why because over the last 20  –  30 years the government have built no council houses and are finding themselves in s**t street so what better way to pretend to help tenants but really what there boing is makeing things a whole lot worse as come April with the new landlord tax changes to top it off some landlords will be selling hahahaha no we don’t have enough rental property’s to go round

     

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  5. lettingsguru

    Whilst I appreciate that ARLA are trying to reach a compromise so that agents at least receive some fee, it does strike me that if an applicant can’t afford a few hundred pounds in advance for admin fees, and they have to pay that essentially on the drip over six months, that any effect on their income both admin fees and rent will stop, then it begs the question as to their suitability of a tenant.

    I haven’t yet come across a tenant who has rented who hasn’t been able to pay reasonable admin fees – they may not like it, but as “wayne” states above I don’t like much paying credit agreement fees, and pre-reg dealer fees, booking fees when buying cars, phones, holidays, tickets and the like.

     

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    1. wayne

      This is my point a rental contract is still a financial agreement as in every other sector YOU HAVE TO PAY A FEE a ban on fees will lead to more evictions more court hearings and less property’s to rent as landlords sell a recipe for disaster a cap on fees is what’s needed i charge £180 for 1 app and £240 for 2 apps I’ve spoken to all my local MPs and the housing minister who have all said I’m in the wrong so time will tell and I will be the 1st to laugh

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      1. lettingsguru

        Interestingly Wayne, I charge something very similar, £250 inc VAT and immigration fee up to 2 applicants, and £120 inc VAT for each subsequent applicant.

        However, my average rent is £11K pcm….

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  6. smile please

    To be honest as letting agents we have missed a trick.

    We should as an industry mounted a legal challenge.

    How can a government ban fees in an established sector?

    In my opinion and very little legal knowledge this is unjust and a restriction of trade.

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    1. Eamonn

      Good idea

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  7. pierce

    I suspect that given the legislation that is proposed there won’t be an outright ban. I believe we will still be able to charge reasonable fees so things like referencing and tenancy agreements will be chargeable.

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    1. Ding Dong

      Personally, I think it will be the full house of bans, especially as they have been to Scotland, and IMHO it will be very easy to legislate for.

      I have changed my whole financial model already on the assumption that even if this does not happen in full next year, one Government will be brave and do it.

      Actually in hindsight, the fittest will survive and those reliant on tenants fees will either disappear or have to actually find a selling point to a landlord beyond full management being done for 5%.

       

       

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      1. pierce

        Have you seen the draft legislation? It says otherwise

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        1. Ding Dong

          draft? there has not even been a consultation yet

          in Scotland, the only fee you can charge beyond rent and deposit, is any fee relating to green deal.  That is written in legislation so the agents who charge for late rent payments etc, are skating on thin ice IMHO.

           

           

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          1. pierce

            My mistake 😉

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          2. lettingsguru

            Ding Dong – I have it on good authority that in Scotland agents can charge for “breach of tenancy”, late rent payments, unnecessary contractor call outs etc etc. But as you say they may well be skating on thin ice.

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            1. Ding Dong

              i agree , a few agents still do and I expect will do until a court challenge is made.

              however as per my initial post, the legislation already clearly defines what can be charged i.e. rent, deposit and green deal payments

              so therefore by default, it would be logical to assume that everything else would be deemed illegal.

              I think england will adopt that methodology as it easier to state what can be charged rather than a list of what cannot be charged.

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  8. Ding Dong

    Surely spreading the cost over 6 months will never be entertained as the tenant will end up paying more  as agents try and cash in i.e. that is why London agents quote weekly rents as it sounds cheaper.

    Not seen one of my landlords ask for a rent increase yet, why because a good % of the rents charged are near market rents.  Most landlords understand at a slightly cheaper rent, you potentially get a larger pool of tenants to choose from.  Also increasing rents continuous gets you a different attitude from the tenant i.e. more repairs reported and less co operation.

    I have a quite a few landlords who never increase rents during a tenants stay because they believe a good tenant is worth their weight in gold.  The agents who claim that rents will go up overnight, maybe in an area where demand completely outstrips supply or they have only been in business 5 minutes.

    Personally, I have accepted the ban in full and have changed my business to reflect that position already.  I was lucky that my tenant fees only equated to about 5% of my total income, so not a major hit for me.  I have made a few minor changes in terms of application process and inventories but neither my landlord or tenant will see any difference IMHO.

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    1. Tcos

      We review rents at every anniversary regardless. In fact I win business by doing this as so many agents don’t and the landlord doesn’t feel like their best interests are being looked after. It is part of our promise to our clients that we will ensure the rents are fair and at a reasonable market level. They don’t all go up but I would say 90% of them do. In my area I have very few landlords who don’t push for a higher rent. There are various reasons for this such as affordability on the landlord’s part, general market conditions and rather than increasing a pool of tenants ensuring you only attract the best.

      The fee ban will see more rents rise. I don’t plan to clobber my clients as I have other plans in place but I will need to react to market conditions. The corporates are not going to take it lying down so they will land the charges on their clients which in turn will push rents up. The demand here is so high that they will achieve theses rents so I will have no choice but to follow suit. All in all the tenant loses out again due to a misunderstanding and mishandling of the market.

      I am sure a year or so ago there was a survey done amongst tenants and there was an overwhelming majority saying that the fees agents charge was not a concern for them. They were more worried about stock and quality which the government are doing their level best to destroy.

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  9. Woodentop

    So David Cox has already admitted defeat, that’s good  leadership for his members? As to spreading it over 6 months …. what the hell for? Am I expected to pay my staff and referencing overheads on the same principle? Nonsense and not how to run a business.

     

    While some agents have taken advantage of the system, many have not but Time spent and expenses incurred should be chargeable, as they are in many walks of life. Picking on agents should also apply to any other industry. I do wonder if this fee’s ban is just an excuse for those anti-agents organisations (we all know who) to disrupt the industry and make it more difficult to stop agents making proper checks, refusing tenancies.

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  10. SJEA

    I think it would be difficult to compare the English ban to the Scottish system as I believe very few Letting Agents charged up front fees.

    I agree with many of the comments above, we should group together to mount a legal claim. This is simply commerce, how is it possible that Government can simply ban fees ? All businesses have to make money to survive and all working people expect to be paid for their services or work done !

    Maybe one of the legal teams could crowdfund a defence, or workaround of the ban ? eg.  A workaround such as applicants having to pass referencing by a third party to reduce our costs ? Is it legal for a third party to make a charge rather than the agent for referencing ?

    Are we, as an industry simply going to roll over and accept the consequences ? Already many business owners are talking about reducing staff numbers…not a good sign for the industry.

     

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  11. Ding Dong

    Legal challenge? Are you lot serious

    Can we look at the legal position on the Law of Agency please

    as an industry we DO have the right to charge fees , the majority CHOOSE to charge both the landlord and tenant.  The ban is on tenant fees not landlord fees.   We do have the right to charge fees for our time and expense, however this quite rightly IMHO, should be to the our client “landlord” and not the tenant.

    ARLA should have stamped down on excessive charges by its larger members in the first instance, and I think this ban would not have been anywhere near consideration.

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    1. pierce

      “ARLA should have stamped down on excessive charges by its larger members in the first instance, and I think this ban would not have been anywhere near consideration.”

      Absolutely!

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    2. smile please

      Sorry Ding Dong, Thought we operated in a free market or am i mistaken?

      Why are other industries allowed to charge both sides?

      How about selling? – Should the seller pay the purchasers legal costs?

      Do you offer lettings yourself? – Do you currently ONLY charge landlords?

       

      I think most agents are fair on fees, every town has one or two that are excessive. Tenants are able to vote with their feet.

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      1. Ding Dong

        HI Smile,

        I only do lettings, and I NOW only charge the landlord 14% inclusive of VAT for the premium management package

        Out of interest what other industries charge both parties? ( i am sure there are some but I dont have my thinking cap on?)

        On selling, we are talking about the agent not the vendor.  The agent charges the vendor but not the purchaser.  In sales, a solicitor can only act for one party for a reason.

        When I started in lettings 20 years ago, we charged one party, so it is not an alien concept IMHO.

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        1. smile please

          Charging both sides the first that springs to mind is an auction.

          So you use to charge tenants but have now stopped? – Why did you use to charge tenants?

           

          As for 14% – Where i am, you would not get a look in most agents are 7% all in

          Agents need the fees. And most only charge £250 for tenant and landlord – Not exactly excessive.

           

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        2. Woodentop

          We charge the landlord for their workload and only the tenant for referencing as they are the tenants references and not linked to a property (think about it). It also saves everyone’s time on time wasters … otherwise our fees would be higher, which happens to be 8% full management.

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  12. Vicars04

    Spread the cost of fees over 6 months?! Across the country considerable time and effort is spent by agents chasing tenants for unpaid rent…yet now potentially agents must chase unpaid fees! Doubt very much if this would be workable. Agents can take the necessary legal steps when tenants don’t pay rent, however where do we turn when outstanding agent fees are not paid…small claims court? Yeah, right.

    Pity a few innovative ideas (better than this one) had not been proposed by ARLA pre ban announcement…

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  13. PeeWee

    Perhaps we should take the Ryan air approach.  A smorgasbord of enhancements to the flyers or in this case tenants experience.

    Priority referencing & Documentation preparation – £250

    You wish to bring a bag into the property?  £25

    You wish to store a Bike / Surf Board / Ironing Board / Musical equipment in the garage / cupboard? £40

    These are not fees, but tenant enhancement experiences that expedite the tenant through the process more seamlessly and quickly than those that do not require these enhancements.

     

    P.s – Having checked Ryanair for inspiration I sh.t you not, they are actually selling AIR.

    Google – (Fees Ryanair) – Scroll down to “Therapeutic Oxygen Reservation Fee”

    Like banning Agents Fees : you cant make this stuff up!

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