“When the people find that they can vote themselves money, that will herald the end of the republic”. Benjamin Franklin.
On Tuesday Labour are planning to amend the Consumer Rights Bill to outlaw tenant fees. I wrote explaining why I thought this was a bad idea and I wanted to share some of my points.
I can appreciate that banning tenant fees might be an easy and popular act to rally people behind. Banning any costs after all is likely to have popular support but it concerns me gravely for a number of reasons I have highlighted below.
What do Tenant Fees Cover?
Fees typically cover referencing of the tenant and setting up the assured shorthold tenancy agreement. Setting up the tenancy agreement is effectively conveyancing work which we take on behalf of the landlord and the tenant.
We conduct due diligence for ourselves and the tenant to answer questions like, does the landlord have permission to let the property from their mortgage provider and do they have legal title to let the property? Without these checks we won’t let a tenancy proceed.
There can easily be half a day’s work in referencing a tenant and setting up a new tenancy agreement. We lodge the tenant’s deposit and deal with the prescribed information paperwork related to deposits.
Why should the landlord carry all the costs of this activity when the tenant is the one making the purchase? Why should there not be an initial fee to cover money for a share of this legitimate workload without which they could not move into their new home?
Other fees that may or may not be excluded by legislation are inventory costs or check out costs. If a property is in good order on move out I am happy to waive costs for a check out fee as it takes less time to go into the detail of resolving issues and I like to reward good tenants even if they are moving on! However if I have to carry out a detailed checkout report highlighting damages I make a charge, per our contract for the time incurred of £60 (and frequently this can be several hours work). Again it’s fair to charge for the work incurred by the tenant.
Fee Transparency
The ASA has already ruled that these fees should be displayed clearly and it’s fair to make charges for our services. We detail our charges on our website.
The Possible Impact on Rents
Without a charge tenants will be able to say they are going to commit to a property and then fail to move in with no penalty. This lack of certainty would be stressful for landlords and agents and we also turn away potential tenants in face of people who have no interest in the property. A key mistake in Scottish legislation.
The small tenant fees act to reduce the likelihood of this. With poor legislation void periods will increase which will lead to rents increasing. Additional costs will be made to landlords which will be added to rent.
The Impact on the Lettings Industry
Where landlords don’t pass on costs research indicates many landlords will seek cheaper agents. Buying on price tends to be a mistake as cheap agents will most likely not be members of professional bodies such as Propertymark, ARLA or RICS. Basically a shot on the arm to the cowboys of the industry.
Is sending tenants to business who do not go to a minimal effort of protecting their customer’s money a good thing for ‘Generation Rent’?
Legislation is Needed
Policy should never be make on the hoof and I back a review into the private rental sector.
We would welcome legislation on all letting agents being required to have Client Money Protection (CMP), like solicitors, rather than being able to use customer money to fund their businesses.
For me, CMP involves being a member of Propertymark and opening my client account to a qualified accountant to audit to ensure I have paid landlords and tenants correctly, have lodged deposits correctly and separated my clients affairs from my trading account.
The sector is not without rogues but Labour has a poor record of implementing housing legislation, remember abandoned HiPs and EPC’s which are woefully underused to the degree of pointlessness.
In Hillingdon the PRS houses 18% of households at the census 2011, up from 11% in 2001. So a popular choice. Many rent because they want flexibility, many rent because they can’t afford a deposit or a mortgage or are seen as a high risk for lenders. We would welcome more housing stock being built which will allow more people to buy and a stable legislative PRS that allows institutional or corporate investment to flush even in build to rent.
Are Letting Agents Anti Tenant?
Labour seems to believe letting agents are anti-tenant. That grates frankly. We work hard to look after them and our property. If tenants are happy and they continue to provide a source of income to myself and my landlord that’s good for business. This is a people business.
