The ban on letting agent fees charged to tenants – announced by Chancellor Philip Hammond in November 2016 – has proved to be a highly controversial issue ever since.
It’s still not been enforced, of course, with the Tenant Fees Bill – which will abolish most upfront fees and cap security deposits at the equivalent of six weeks’ rent – currently making its way through Parliament.
It recently passed the second reading stage in the House of Lords, with the next hurdle – the Committee Stage, where the Bill will be examined line by line – scheduled for November 5.
After that comes the report stage, the third reading and the consideration of amendments, before the Bill is given Royal Assent and becomes enshrined in law.
The government has provisionally said the ban will come into force by spring 2019 at the earliest, but with quite a number of stages still to pass and the ongoing distraction of Brexit negotiations, there is a good chance it won’t be in place until much later in the year.
Greater protection for tenants
With a rising number of renters in England (some 4.7 million households now rent privately, making it the second largest tenure in the UK and the largest in London), there have been increasing calls to make the process as affordable as possible and to offer tenants as much protection as possible.
This was the background under which the ban on letting agent fees was announced nearly two years ago, leading to furious opposition from letting agents and trade bodies. The main argument against the ban is that letting agents, in an effort to offset losses in revenue, will charge higher management fees to landlords, who will in turn pass these extra costs to tenants in the form of higher rents. The very people the ban is supposed to help would, opponents say, actually lose out the most.
Supporters, meanwhile, argue that the ban on fees provides greater security to tenants from rogue landlords and agents, and that the introduction of a similar ban in Scotland has had no noticeable negative impact on the private rented sector in terms of higher rents or landlords exiting the market.
Trade bodies such as ARLA Propertymark have spent a lot of time lobbying the government on behalf of letting agents, trying to get amendments tabled to reduce the impact of the ban.
After the Bill’s successful passage through the House of Commons earlier this year, ARLA Propertymark Chief Executive David Cox said: “We’re disappointed but unsurprised the Tenant Fees Bill has passed the House of Commons. Over the summer, we worked with Daniel Kawczynski MP on his amendment to allow agents to charge up to £300.”
“Although the amendment was unsuccessful, this shows that members involved in ARLA Propertymark’s campaign have helped MPs understand the unintended consequences of the tenant fee ban; with some MPs listening to the legitimate concerns of the industry.”
The organisation has set up a dedicated ‘The Ban on Letting Agent Fees’ page to provide more information about the proposed ban, its timeline, its possible economic impact and the lobbying efforts being made by ARLA Propertymark to protect the interests of letting agents.
Preparation key for agents
With the prospect of the tenant fees ban on the horizon, plus a host of other regulation and legislation that has been introduced in recent times, agents need to be on the ball and up to speed more than ever before. Research commissioned by ARLA Propertymark (and carried out by Capital Economics) found that agents could stand to lose £200 million in turnover as a result of an outright ban.
Taking this into account, agents have been urged to find alternative revenue streams to offset these potential losses. Suggestions have included offering management services for short-term lets (pouncing on the huge popularity and success of Airbnb and other short-let sites) and specialist Build to Rent advice, whereby agents form partnerships with institutional investors to take advantage of the rental sector’s fastest-growing marketplace.
Streamlining services and working efficiently will also be hugely important as the ban starts to take hold, which is where property software becomes vitally important. A cloud-based, all-in-one system – allowing you to manage all aspects of your business from anywhere in the world, at a click of a button – will help you to stay on top of things, from office accounting to management of staff and clients.
An attractive, interactive and user-friendly website will also be crucial, enabling you to keep landlords and tenants up to speed. Social media, too, will help you to disseminate these updates in an instantaneous fashion, with social media integration on your website helping to make this even more flawless.
Knowing that your business is in fine working order, with everything working together in complete harmony, will offer you peace of mind and allow you to explore additional revenue streams if this is required. It will also give you more time to work with landlords to ensure that the consequences of the ban are properly understood, and how these can be mitigated against or minimised.