Renters will no longer be charged fees by lettings agents in England and Wales, under new rules unveiled by the Government today. But it remains to be seen whether the costs are diverted back to tenants in the form of increased rents.
In today's Autumn Statement the Chancellor Philip Hammond said he hoped to bring in the ban, which it's estimated will benefit 4.3 million households across the country, "as soon as possible". Landlords will be expected to foot letting agents' bills instead.
According to figures produced by charity Citizens Advice, letting fees have increased by 60% over the past five years, with some renters paying as much as £700 for what is usually basic admin work.
In Scotland, letting agents' fees to tenants have already been banned, while in England and Wales letting and managing agents have been legally obliged to clearly publicise their fees since last year. See our 50+ Tips for Renters for help on how to rent cheaply and safely.
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Will renters be better off as a result of this ban?
In theory the answer is 'yes', as letting agents can often charge sky-high fees. Citizens Advice figures based on a survey of tenants suggest the average letting agent fee rose from £125 in 2009/10 to £200 in 2014/15, with some asked to pay up to £700.
But the ban has not gone down well with landlords - who will be expected to bridge the gap in terms of paying for letting agents' fees - and it has already been suggested they will look to recover their costs by upping rents.
Richard Lambert, chief executive at the National Landlords Association (NLA), said: "There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long. Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent.
"But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents.”
David Cox, managing director of the Association of Residential Letting Agents (ARLA), added: " If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents. The banning of fees will end up hurting the very people the Government intends on helping the most."
But even if landlords do increase rents as a result of being asked to pay letting agents' fees, the cost will be spread out over the course of a tenancy - meaning renters won't have to stump up £100s upfront.
When will the ban start?
There's been no confirmed date for the ban yet, but Hammond did say it would be introduced "as soon as possible".
The Department for Communities and Local Government is responsible for the housing sector and will consult ahead of bringing forward legislation.
What are letting agents' fees for?
Letting agents' fees are charges for the admin costs associated with a tenant moving in to a property.
Before letting a property, agents run a number of checks on potential renters. The subsequent admin costs include:
- Drawing up contracts
- Taking an inventory of the property before tenants move in
- Running credit checks
- Getting references from previous landlords, agents and employers