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Will agent fee bans increase rent? How will this Affect Landlords and Tenants?

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Lettings agents in England will be banned from charging fees to tenants “as soon as possible” under plans announced in the previous Autumn Statement.

On the 7th April, the government published its long-awaited consultation into its proposed ban on letting agency fees. This consultation was open for responses until the 2nd June 2017. The ban will need primary legislation and so the actual implementation date is not clear but is unlikely to be before late 2018.

How could the agent fee ban affect Landlords and Tenants?

Letting agent fees are charges imposed on tenants for things like preparing tenancy agreements, contacting referees and performing credit checks. Letting fees have surged to an average of £337 per tenancy, according to Citizens Advice.

The proposed ban will stop hidden charges and end tenants being hit by costly upfront payments that can be difficult to afford, the government has said. This will help save money for tenants and allow the costs of renting a home to become more affordable for the public.

However, tenants have been warned that it may not be as good for them as first appeared. Tenants have been cautioned that they may not benefit from the government’s ban on letting agent fees – because the costs will be passed onto them by Landlords increasing their rent prices.

A conflict has erupted due to the fact that lettings agents could now up their charges to Landlords in order to recuperate the losses that the ban will take from them. In turn, this will have a knock-on effect and force landlords to raise rent prices in order to cover the higher fees charged to them by lettings agents.

Landlords hit by higher fees from their current lettings agency could simply move to a cheaper lettings agency to avoid additional costs, but again this causes a knock-on effect for agencies competing for Landlords.

Richard Price, of the UK Association of Letting Agents, said: “A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.”

Richard Lambert, of the National Landlords Association, said: “Banning letting agent fees will be welcomed by private tenants, at least in the short term, because they won’t realise that it will boomerang back onto to them in the future.”

The ban could see a snowball effect happen within the industry that will affect lettings agents, landlords and tenants alike, but until it is imposed, it is a waiting game to see what happens.

One silver lining which might work in favour of Landlords and Tenants is the fact that landlords can choose which agent they use. This means they could go with a lettings agent that is willing to take the hit in order to keep their Landlords happy, and therefore there will be no need for the Landlord to raise their rent prices.

For more information or a chat in more detail please do not hesitate to contact me,

Jason Cunningham

Swindon Property Blog