Landlords or Letting Agents - Who Will Be Scrooge This Christmas? - The Law House Family Law Solicitors, London & Peterborough


Landlords or Letting Agents – Who Will Be Scrooge This Christmas?

By in All Blogs, Property Law Category on November 24th, 2016

Every news site you read today or every paper you open (does anyone read papers these days except the freebies available on trains?), you will be bombarded by someone’s view of the Autumn Statement. By now, you are no doubt bored senseless by it all or looking at ways to cryogenically preserve your body in the hope to wake up in a debt free country in about 100 years’ time.

However, more and more people are renting properties and so they should be interested in a small provision in the Autumn Statement about fees chargeable by letting agents to prospective tenants.

Charges often made by letting agents prior to a tenant moving in:

  1. Charges for reference and ID checks – usually undertaken by a third party. Letting agents can pass this cost to tenants along with an additional admin fee.
  2. Charges for placing the deposit in a deposit scheme.
  3. Charges for drawing up the tenancy agreement

The level of fees varies, as do the items they cover. Thankfully for tenants, these various charges will now disappear in an attempt to help tenants.

But you know it is never as simple as that!

Landlords pay an upfront finders fee to the letting agent, which can be anything from 7-15% of the annual rent. In addition, some landlords also pay a management fee to the letting agents, again the same range of 7-15% of the annual rent.

Landlords are obliged under legislation to do various checks on tenants before the tenant occupies their property such as the ID and reference checks referred to above. And these costs have to be funded from somewhere. There is therefore a good chance that rents will increase to absorb the cost.

In the long run, it seems that tenants may initially be penalised indirectly and landlords may also be charged more by the letting agents to undertake the tasks for which tenants were asked to pay. It will be interesting to see who really benefits from these changes.

The Scottish experience

However, we should also look to Scotland, whom we seem to use as a trial run for policies such as these. Scotland introduced a ban of fees to renters in 2012 and research indicates, whilst there was a small increase in rents, this was short-lived.

Research carried out by Shelter seems to indicate that landlords in Scotland are no more likely to have increased rents since 2012 than landlords elsewhere in the UK.  Some experts interviewed as part of the research by Shelter stated that rent levels are affected more by demand and wages than legislative changes such as these.

Overall, the initial research seems to indicate that neither tenants, landlords or letting agents have been adversely affected by the ban on letting fees on tenants in Scotland. Although we have yet to see if this will be the case when the ban is introduced in England and Wales.

Whilst there will be uncertainty regarding this for a while, and Brexit has probably made uncertainty  a way of live for us all now, until everything has settled down, it is always good to read the small print when signing up as a possible tenant with a letting agent. Make sure you know what you will be expected to pay for.

If you have any queries or concerns, please contact us on 020 3150 1919.