Ban the fees or lose the keys
200£+ 2 x 575£ + 100£ +150£ — can you do the math? I am not counting the stars and neither the cows. I am counting the fees to secure the keys for a one bed flat I am about to rent. You may think I will be living on a cloud nine? Not right! 1/3rd of the total £1.5k goes to the agent charges and, being told that, I am backing out.
Last year, Chancellor of the Exchequer by Command of Her Majesty, presented the Autumn Statement for the Parliament, saying ‘the government will ban letting agents’ fees to tenants, to improve competition in the private rental market and give renters greater clarity and control over what they will pay’ (Autumn Statement 2016: section 3.41).
Media instantly ‘celebrated’ the news: the Guardian proposed that ‘millions of families who are being charged hundreds of pounds by agencies’ will be offered a ‘relief’ (Mason, Asthana and Stewart, 22nd of November, 2016); the Sun even cited chief executive of Citizens Advice Gillian Guy words, who ‘thanked to the ban’ saying that ‘renters will be hundreds of pounds better off’ (Evans 23rd of November, 2016); and the Negotiator came up with ‘a better solution’ instead of a ban, saying Chief Executive of NALS (National Approved Letting Scheme) offers ‘a cap’ instead of ban (Thomson 6th of January, 2016).
But have those promises brought any benefits for us? Nope! On 23rd of November 2016, BBC said:
‘Letting agent fees will be banned ‘as soon as possible’ ’(Peachey)
1year and 4months has passed since then and no so-called relief has been noticed. It just confused the people, as when the statement came up, many News Websites did not give any approximate date of the ban coming into force so the people thought it means that the fees are banned instantly!
Here is an example of people response, saying: ‘the fees have NOW been banned’ (note: posted 17 weeks ago) — even though it haven’t!
Hooray for the democracy! How long is it going to take?! Ban the fees!
Letting agents’ fees not only are way too high but also lack the transparency. ‘Nearly one in four people in England and Wales feel they’ve been charged unfair fees by a letting agent’, shows Shelter report (Generation Report 2016). This occurs because of enormous charges. According to the Latest English Housing Survey in the report by EHS (Environment, Health and Safety), the average fee incurred by tenants is £337 (Department for Communities and Local Government). More importantly, one in seven renters are paying £500 or more (YouGov survey for Shelter, 2016).
The main reason for the lack of this transparency is the lettings market being competitive, while ‘there is no real competition between agents for tenants’ (Generation Rent report 2016). With the aim to increase the transparency, the tenant-side fees should be passed to landlords and this could only be done with the ban coming into force.
However, some people argue that the ban would have a negative impact and would lead to the higher landlord costs, which could feed though to rents. Even so, if I had to choose whether to pay £ 1.5k at once or £1k and remaining £500 per tenancy term, I would choose latter, as ‘the fees spread over the length of the tenancy reduces the financial shocks of renting’ (Shelter 2016). Notwithstanding, political ‘Independent’ correspondent Jon Stone reassures that there is no need to worry about higher rents. He reassures:
‘economic literature suggests that it will be difficult to increase rents to make up for revenue because landlords are likely already charging the highest rents possible under market conditions’ (23rd of November, 2016).
Here you can find Hazel de Kloe, leading UK property mentor and coach explainer on letting agent fees and it’s effect on rent price to landlords and consequently to tenants.
This lack of transparency in lettings market also leads to a breach of law and the tenants being misled by the agencies. Why employment agencies don’t charge us that much as letting agencies do? That is, why the ban is needed — ‘to shift the industry’s business model closer to the other agency markets, in which fees are charged only to one side of transaction’ (Generation Rent report 2016). In this case, one side should be the landlord.
Misleading also includes hiding the fees. Not only we are asked to pay enormous fees, but also we are being told to pay ‘wrong’ fees (presented without the hidden fees (!)). On top of that, 14% of letting agents don’t list their fees on the websites and another 18% of letting agents list fees exclusive of VAT (www.lettingfees.co.uk). Not including VAT in the price is recognized as being misleading to tenants — ‘such is banned by every corner of the regulatory system’, tells Telegraph (Rudgard, 17 of January 2017).
Here you can find an explainer of why it is against the law:
‘Under current rules, letting agencies should also not charge tenants for the same things that landlords are charged for, or charge non-specific ‘administration fees’, also tells the Telegraph. So, all of those fees are mixed up and doubled — not only we pay for it but also the landlords do! And as Ms. Anders tells the Telegraph ‘we don’t have any choice’ and because of that landlords and agencies are exploiting this fact (Olivia Rudgard, 17 of January 2017).
The question is, do we know where are those agents’ money going to? We don’t! £200 for tenancy agreement renewal. What for?
A Twitter user even makes a joke that probably the £200 fee she just paid for a contract renewal, covers the photocoping fee of a new contract (well, which usually costs us 20p for the printing, doesn’t it?) and a cup of coffee to brighten the day.
However, the section 9.11 of the Competition & Markets Authority, Guidance for Lettings Professionals on Consumer Protection Law says:
‘where a tenant wishes to remain in the property, he should not be charged any additional fee for holding over under a statutory periodic tenancy, or given the impression that he is obliged to agree to a new fixed term agreement’.
She should not have had to pay the fees. This is why the ban is needed, to make it clear! I would rather convince myself that most of the letting agencies don’t know the law than would again face the fact that this is another lie, imposed by the letting agencies for the ordinary tenants, who usually doesn’t know the law as well.
Isn’t it robbing? You know the right answer, but David Cox, managing director of the Association of Residential Letting Agents (ARLA), thinks controversially — he says ‘most letting agents do not profit from fees’ and this ‘ban on letting agent fees is a draconian measure’ (BBC 23rd of November, 2016). I am afraid, but it would not have been set in the first place, if it was not needed…
Thankfully, the Housing Minister Gavin Barwell has confirmed that ‘the consultation on the proposed ban on letting agent fees levied on tenants in England will launch ‘in the Spring’’ (Landlord News), because owewhelmingly, 63% of the British public support this ban and wait for it to come into force, with only 10% disagreeing, according to the YouGov survey, conducted for the Shelter report. Let’s hope not long is left — ban the fees!
By Berta Balsyte