They said that the move ensures a fair deal for landlords and tenants, closing off the opportunity for a small minority of rogue agents to impose unreasonable, hidden charges.
The added that such as common sense approach will avoid excessive state regulation which would push up rents for tenants.
Currently, the Advertising Standards Authority only requires letting agents to list compulsory charges to the tenant upfront in the process. Those letting agents who are found to have imposed hidden charges face little more than being named and shamed on the ASA website.
But the government wants to go further than this, and will require all letting agents to publish a full tariff of their fees both on their websites and prominently in their offices. Anyone who does not comply with these new rules will face a fine, a much stricter penalty than currently exists.
‘The vast majority of letting agents provide a good service to tenants and landlords. But we are determined to tackle the minority of rogue agents who offer a poor service. Ensuring full transparency and banning hidden fees is the best approach, giving consumers the information they want and supporting good letting agents,’ said Housing Minister, Kris Hopkins.
‘Short term gimmicks like trying to ban any fee to tenants means higher rents by the back door. Excessive state regulation and waging war on the private rented sector would also destroy investment in new housing, push up prices and make it far harder for people to find a flat or house to rent,’ he added.
The government’s amendment to the Consumer Rights Bill will be made at a future stage of the bill and it will review the requirement for greater transparency after 12 months of operation to confirm it is delivering the expected benefits, and review whether any further steps are needed.
Trade bodies have said any blanket ban on all fees would just increase rents but the government pointed out that it has already introduced new legislation which will require all letting and managing agents in England to belong to an approved redress scheme.
Other measures in the pipeline include a new code to set standards for the management of property in the private rented sector with a view to making it statutory and a new ‘how to rent’ guide, which will help tenants understand what they should expect from their rental deal.
There are other changes on the horizon such as the introduction of a voluntary, model tenancy agreement, which landlords and tenants can use for longer tenancies, which will provide extra security and stability for families and extra guidance for local councils on tackling rogue landlords, protecting tenants from illegal evictions and how best to push for harsher penalties before magistrates for housing offences.
However, not all the reaction has been positive. According to David Newnes, director of the largest network of letting agents in the UK including Your Move and Reeds Rains, owned by LSL, said that while it may seem that tenants would be better off if there were no up front fees attached to arranging a proper legal tenancy but the cost will still be there and in reality tenants could be far worse off.
‘Tenants could very well end up paying a lot more, not less. In reality this legislation would only add to the cost of living. Scotland has already suffered from exactly this. Following the banning of tenancy fees in November 2012, we saw Scottish rents rise 4% in the space of just six months. This is 10 times the rate of rent rises in England and Wales over the same six month period, where such a ban had not been introduced. Before this jump Scottish rent rises were broadly flat,’ he explained.
‘Ensuring that a legally binding Tenancy Agreement is in place, protecting both the tenant and the landlord, takes time and expertise and costs money. This ultimately has to be paid for somewhere. Comparing the lettings and purchase markets is a difficult direct comparison. However, the legal services provided by letting agents can be likened to legal fees for conveyancing services for those who buy their home. In addition, a proper inventory, for the benefit of both tenant and landlord, takes a specialist inventory clerk at least an hour for the average property. Tenant references are taken and credit checks are also carried out, again with associated time, expertise and costs,’ he pointed out.
He believes that the very people this legislation is trying to help may well be the ones who get excluded from the property they need. ‘If tenant fees are banned and the landlord and letting agent have to bear the cost, there is every possibility letting agents and landlords will start pre-vetting tenants. Furthermore, if tenants have no advance financial commitment then there is nothing to stop them pursuing multiple tenancies at the same time and just taking the first one that completes, dropping the others,’ said Newnes.
‘Equally, letting agents should be clear about what they charge. Tenants could then actively de-select any letting agents who try and over charge. But that is why we welcome moves to enforce transparency. Finally, it should be remembered how not all landlords are fat cat investors. Many only have one property used as their pension. Others are accidental landlords and rely on the rent to pay their mortgage. If tenants drop out at the last moment, this could mean hardship. Missed mortgage payments would lead to possible repossession. New landlords would be wary of entering the market or extend portfolios. Many would exit,’ he added.
Newnes said that it would be far more effective would be if politicians focussed more on encouraging the supply of new homes and should recognise that rent rises in England and Wales now match wage growth while late rent is at the lowest levels on record.
‘There is no crisis in the private rented sector but misguided policies could easily create one,’ he concluded.
