Letting Fees banned in Queen’s Speech

The announcement in the Queen’s Speech that tenant fees will be banned is very worrying and indicates a lack of understanding by the Government on the workings of the private rented sector.

David Cox, CEO of ARLA says “The announcement of the draft Tenants’ Fees Bill was disappointing. It is unlikely the Government had enough time to analyse all of the responses from the consultation as it only closed 12 working days before the Queen’s Speech. It appears that they had already made their decision and therefore the consultation was no more than a “tick box” exercise and they haven’t appropriately taken the industry’s views into account.

A ban on letting agent fees will cost the sector jobs, make buy-to-let investment even less attractive, and ultimately result in the costs being passed on to tenants. Research conducted by Capital Economics for ARLA Propertymark earlier this year shows that referencing checks undertaken by agents take, on average, eight hours to complete. It is therefore right and proportionate that the industry is recompensed for this work, which benefits the tenants. The research also shows that letting agents stand to lose around £200 million in turnover, costing the sector 4,000 jobs. Landlords themselves would lose £300 million meaning that they may seek to cover their losses by increasing rents.

The Queen’s Speech states:-

“Tackling unfair fees on tenants will make the private rental market more affordable and competitive. The draft Bill will bring forward proposals to:-

Ban landlords and agents from requiring tenants to make any payments as a condition of their tenancy with the exception of the rent, a capped refundable security deposit, a capped refundable holding deposit and tenant default fees.

Cap holding deposits at no more than one week’s rent and security deposits at no more than one month’s rent.

In our response to the consultation document we made it clear that security deposits should be set at a level than ensures that tenants have a meaningful stake in paying the rent and maintaining the condition of the property. In setting the figure at no more than one month’s rent the Government are failing to take into account any damage that can be incurred while a tenant is simultaneously defaulting on the rent. Landlords and letting agents will inevitably have to work out how to manage the risk involved and recover the difference in costs. “

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