Letting Agents Fees to Be Banned. Thoughts?

[Cyclone 10]

In the last years of the 20th century dwellings were usually let bare of any but bathroom fittings and few had double glazing or central heating. There are not many dwellings now that are let like this, and yet people seem to be surprised at the levels of rent, when landlords provide all the above named things and use an agent to deal with the property.

It seems that some younger people think that all this should come free and have never given a thought to how it all arrives. Lol.

 

What nonsense is this?

The last years of the 20th century, ie 1990 - 2000...

Few had central heating?

You seem surprised that landlords provide "floor coverings of some kind", "a kitchen"...

Possibly double glazing levels have increased, but then they have across all the housing stock, although I'd have said that was a trend that started in the 1980's and was largely complete by 2000.

"Younger people" are probably just looking at the cost of rent compared to how much they earn. They aren't interested in the finances of the landlord, so much as in their own.

[Hippogriff 10]

Let's not argue amongst ourselves, I think we can all agree that what the Government is planning here is not good, for anyone.

[vincentb 10]

Let's not argue amongst ourselves, I think we can all agree that what the Government is planning here is not good, for anyone.

 

I disagree - it will be very good for tenants because the main impact will be that they pay exactly what the landlord requires them to pay, as advertised, no more and no less. If that means the tenants have to pay more rent to genuinely cover agency costs, that isn't a problem for anybody - because the tenants are paying for it already, just through a different route (and without prior knowledge of what they would have to pay).

 

Landlords such as Hippogriff, who have found a registration fee useful to distinguish serious tenant applications from 'tyre-kickers', may need to vet tenants in a different way, so that is a downside - but I think it's a relatively minor one compared to the upside of freeing tenants from agency abuses.

[Hippogriff 10]

I was kidding about everyone being on the same page.

 

My genuine concern is that Tenants will pay more the longer they stay. A Landlord who successfully raises the rent by, say, £10 per week to cover any additional charge they are hit by from their Agent, will not reduce the rent by £10 per week once they've made that amount back.

 

But, that is not my major concern, it is as I have said... how do I effectively protect myself from the applicant who isn't serious? In the past, and today, I get that feeling of protection when they pay their application fee to the Agent for referencing etc.. I am guessing it will be via a holding deposit... or getting sight of first month's rent in my account well before the time I ask for it today (with only some of it being refundable if the application falls-through for any reason that is not my fault?).

 

A consistent approach would be good... but I fear different folk will approach it in very different ways and that'll just add to the confusion for Tenants (well, everyone).

[Cyclone 10]

Let's not argue amongst ourselves, I think we can all agree that what the Government is planning here is not good, for anyone.

 

It's good for the tenants who are fed up with being ripped off by unscrupulous agents. I think that's the point. Many, many people are unhappy with the agents behaviour and that's exactly why the government is taking action.

[Hippogriff 10]

You could be missing the point about Tenants being likely to actually pay out more over the term of an average tenancy (which is around 18 months, I gather).

 

A Landlord cannot bank on that 18 months - many will have a fixed term of 6 months, some of 12 months. If the Agent's fee of, say, £500 is transferred from the Tenant to the Landlord and the Landlord is successful in recouping that via a modestly increased rent - but likely to be calculated over the 6 months or 12 - then the Tenant will pay more (just not in one lump-sum).

 

Currently as £500 + (18 x £500 rent) = £9,500.

 

Future could bring £0 + (18 x £500 + 18 x £41.66 (that's £500 / 12 - worse if the Landlord manages to do it over 6 months)) = £9,749.

 

And it just increases the longer the tenancy runs for.

 

That said, I do absolutely accept some Agents charge for renewals (but that's not what we're talking about here - we're talking about the application fees at the start).

 

I'm not saying that part is good or bad; just that it can end up with the Tenant paying out more. I'm still concerned about the tyre-kicking aspect only.

 

Time will tell, I guess. It's still a Landlord's market out there - good properties will attract numerous offers from prospective Tenants.

 

---------- Post added 29-11-2016 at 11:15 ----------

 

It's good for the tenants who are fed up with being ripped off by unscrupulous agents. I think that's the point. Many, many people are unhappy with the agents behaviour and that's exactly why the government is taking action.

 

Landlords too, right? Landlords aren't saying the Agents are wonderful either. Just most of us seem to believe they're kinda necessary. I tried UPad once and it didn't work out as well for me. I listed the same property via an Agent and the replies came flooding-in (same frikkin' pictures and description too!). Seems a lot of enquirers believe an Agent is necessary too (or somehow benefits them).

[bennyboy77 10]

Hi all (op here)

 

Thanks so much for all the responses, a really interesting read.

 

Playing my card here - I'm an Estate Agent with Offices in both Sheffield and Rotherham and the purpose of my post was the get the thoughts of both Landlords and tenants on how you thought this would affect you moving forward and who will the cost actually sit with - Letting agents? Landlord? Tenant?

 

I would like to ask you all a couple of questions both as landlords and tenants. . . .

 

What would you like to see a Letting Agent do here? Should they pass the fees back to Landlords who in turn could increase rents? Should they take the hit on being unable to charge upfront fees?

 

We currently do charge upfront fees for tenants which are extremely reasonable compared to other agents but this is something we are going to have to review.

 

I'll be honest I think 2016 has seen Landlords been hit left right and centre. What can we do as Letting Agents to change this?

 

Thanks again

[Hippogriff 10]

As a Landlord... it'd be for you to absorb the costs. But I doubt you'll be able to on a simple Tenant Find engagement. What's in it for you, really? I know people can accuse an Agent of getting paid by both sides in the transaction, but I am unable to see how you can rationalise £500 + £500 (example) down to £500 in your business model.

[bennyboy77 10]

As a Landlord... it'd be for you to absorb the costs. But I doubt you'll be able to on a simple Tenant Find engagement. What's in it for you, really? I know people can accuse an Agent of getting paid by both sides in the transaction, but I am unable to see how you can rationalise £500 + £500 (example) down to £500 in your business model.

 

It's going to be a tricky period for ALL agents - the bigger corporate firms will get hit hard. These fees are a substantial income stream for agents - especially those who charge large upfront fees.

 

As a smaller, independent agent we currently manage over 500 properties and are trusted by landlords over South Yorkshire (my only plug I promise!!) and we will need to adjust our business model accordingly.

 

As I said though the one thing we WON'T be doing is punishing landlords by increasing managed fees or other costs. They've had it hard enough this year as it is . . .

 

Lets be honest though their needs to be a balance. Something that is fair for the agent (if you decide to use one) fair for the tenant and fair for the landlord.

[Hippogriff 10]

The way I see it working is this...

 

I usually engage an Agent for Tenant Find only. I pay, say, £300 to them as a one-off. The prospective Tenants go through an application process and that fee is variable depending on a few things, but let's say it's also amounting to £300.

 

The Agent will not be able to absorb that £300 loss on a simple Tenant Find, so the cost will be moved to the Landlord, maybe it's at the whole £300 or something more meet-in-the-middle.

 

If it's £300 that the Landlord has to pay extra, that's likely - really - £180 - but that cost should still be recouped, so it's time to mark up your property by an amount it will take. I had suggested £10 per week... around £40 per month.

 

It's likely fair. No-one loses out. The Tenant avoids the bigger one-time hit to their finances... it's just not great for them long-term and it's not totally transparent either.

[jasd75 10]

Any significant increase in fees from my current EA will probably see me move to an online one, like Upad or similar. It's a shame as we have been working together very well for the last decade or so but my decisions need to be made as a business.

 

I just hope the Government won't start disallowing other costs, like EA fees, to further increase our tax bills...

[Jeffrey Shaw 90]

The announcement seems not to acknowledge law already in force, even if a bit unused, e.g.

the Accommodation Agencies Act 1953 http://www.legislation.gov.uk/ukpga/Eliz2/1-2/23/section/1

and the Cost of Leases Act 1958 http://www.legislation.gov.uk/ukpga/Eliz2/6-7/52/section/1

 

So what's needed is just to update, consolidate, and enforce these provisions, surely.

 

---------- Post added 29-11-2016 at 17:34 ----------

 

What would you like to see a Letting Agent do here? Should they pass the fees back to Landlords

Yes. The landlord is your client, after all.