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A look at the letting fees ban for tenants

The lowdown on...the letting fees ban

By Maurice Shasha  //  Wed 17th May 2017
Central London estate agent Plaza Estates takes a closer look at the letting fees ban for tenants in more detail.
Last year's Autumn Statement is naturally a prickly subject for London's landlords and letting agents. It was during his speech that Chancellor Philip Hammond first announced the government's plans to ban tenants from paying letting agents' fees.

In responding to news of the ban, Chief Executive Officer at the National Landlords Association, Richard Lambert, said that tenants would likely not be better off, as some agents may have no option but to push fees onto landlords, and landlords, in a bid to recover costs, may resort to increasing rents. For tenants, Lambert predicts the ban will "boomerang back on them".


In this article we look at the letting fees ban for tenants in more detail.


Why is the ban being introduced?

The government maintains that while the vast majority of letting agents provide a fair and transparent service, a small minority of 'rogue' agents do not. The ban therefore aims to improve transparency for both tenants and landlords when choosing an agent, boosting competition in the private rental sector. Meanwhile tenants will be able to see, at a glance, what they can afford. They will also know upfront what they will have to pay, making it easier and more affordable for tenants to rent a property. The government also hopes the ban might encourage longer, more stable tenancies, reducing void periods for landlords.


What will the ban actually mean for tenants?

Tenants will still be required to pay a deposit and a month's rent upfront at the start of a new tenancy, but they will no longer have to pay letting agents' fees, which include charges for reference checks, inventories, and drawing up the contract. In the short-term at least, tenants will be better off.


What is the likely outcome?

Letting agents may choose to push the costs, once absorbed by tenants, onto landlords. This means landlords would end up paying the cost of administrative fees, which in turn could lead to higher rents for tenants. However, landlords have the freedom to shop around and compare different agents. They can then go with the agent they feel offers what they need at a price that appeals to them. This could boost competition in the sector and drive costs down. Alternatively, letting agents may look to absorb the extra costs themselves, while diversifying the services they offer to landlords

A similar ban on letting agents' fees for tenants was introduced in Scotland in 2012, but research shows that landlords were no more likely to increase rents in Scotland after the ban than they were anywhere else in the UK.


When will the ban be implemented?

It is likely the ban will not be implemented until late 2018. A consultation paper was published in April this year, and the consultation phase will continue until 2 June 2017, just days before the General Election. The consultation phase gives all interested parties the opportunity to respond to the consultation paper. An impact assessment will then be drawn up, before being brought to Parliament.

If you require more information, the government's consultation paper can be viewed here. Alternatively, if are looking for properties for sale or let in South Kensington, Bayswater, Marble Arch, Kensington, or Paddington, as one of the leading estate agents in Prime Central London, we'll help you find the right property for you. Get in touch today.

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