Brighton and Hove letting agent speaks out on banning fees

Julian Bishop SUS-161125-085438001
Julian Bishop SUS-161125-085438001

The Chancellor announced he would ban letting agents’ fees, in his Autumn Statement on Wednesday (November 23).

This was praised by housing campaigners and the Green MP for Brighton Pavilion Caroline Lucas, but what do letting agents think?

The new move would see a ban on letting agents charging an upfront fee, often ranging in the hundreds of pounds for renters before they can move into their new homes.

But Julian Bishop, director of Brighton-based letting agency Bishop Sullivan, said he thought the move was ‘a good thing for tenants and the industry in the long run’.

He said: “Low income earners are struggling with the upfront payments of fees, rent and deposit. Landlords will undoubtedly put rents up to cover the costs of any fees transferred from tenant to landlord in the short term which I expect will result in a similar cost to tenants. But there is an affordability ceiling and if rents are too high few will move meaning the only option would be to reduce rents, the market may end up stabilising itself.”

Mr Bishop said the government had not yet made clear whether the ban would focus on ‘just the upfront fees or also included other fees such as guarantor fees, renewal fees or check-out fees at the end of tenancy’.

Explaining the government’s move, Mr Bishop said: “The private rental sector has nearly doubled in size from nien per cent to 18 per cent since 2001 and there are now approximately 4.5 million tenants in the UK. The credit crunch played its part in shifting from buying homes to renting and then stricter lending criteria came into play in 2014 which made it harder to borrow. The current market is one where demand has outstripped demand more often than not and tenants have little choice but to pay the fees if they want to rent the property.

“Low income earners are struggling with the upfront payments of fees, rent and deposit. With Brexit coming up and cost of living already increasing reducing tenant fees will offer some form of financial assistance to these 4.5 million voters.

“Before 2000 many letting agents did not charge fees to tenants, and the increase over time has happened organically rather than via regulation. To be fair the industry does need a shake up and has a different model to many service based industries as the consumer (tenant) pays for the service as well as the client (landlord).

“Once the legislation has been changed tenants will not be liable for at least upfront fees for a tenancy, only the rent and deposit.”

He also explained what tasks letting agent takes on from viewing to moving in, and who is charged for it.

- Application letter drawn up and signed by the tenant (tenant charged)

- Holding fee (usually £250) received (tenant charged)

- References sub-contracted to a referencing agency who invoice the agent (tenant charged)

- Tenancy Agreement (sometimes both)

- Guarantor referencing and Agreement (if required) (tenant charged)

- Arrange a clean if required (landlord charged)

- Arrange safety certificate if required (landlord charged)

- Carry out maintenance if required (landlord charged)

- Copy tenants passports and proof of address (tenant charged)

- Inventory report created by professional clerk who invoice the agent (landlord charged)

- Check-in with inventory report and keys handed to Tenant by professional clerk who invoice the agent (either tenant or landlord charged)

- Register the deposit with one of the three schemes (either tenant or landlord charged)

- Forward copies of all paperwork to tenants (contracts, safety certificates, deposit certificate, How to Rent guide, info on Legionnaire’s disease) (tenant charged)

- Commission charged to the landlord is on top of these charges, included introduction, rent collection and management.

Mr Bishop said: “Whichever way you look at it the work from the offer stage to move in still has to be done, much of which is a legal requirement. Work as you know takes time and time means money, ask any solicitor! The fees will most likely be charged to the landlord as with Scotland as most businesses will struggle or fold without some or all of this income.

“This is likely the logic behind the move as landlords will then become the driving force behind service standards. If landlords are paying for the admin service in full then they are going to want to ensure they get the best value for money. An effective way of sorting the wheat from the chaff as rogue agents, those who provide a shoddy service or charge way too much will get found out pretty quickly. I know what I’d do if my house insurance premium suddenly went up. Surely this will be a good thing for the industry as a whole.

“Letting agents will have to find a way to survive with lower revenue as I really cannot see a landlord wanting to pay the average fee for three tenants coming to £660 + his/her admin fees plus commission. With reduced revenue, some more than others, staff redundancies and even office closures are very real, which will have a negative impact on the level of service provided generally.”

But he said in the long-term the move would be good for tenants, not so good for landlords, and ‘not good for letting agents but will level the playing field for smaller agencies who provide a quality service without charging the earth’.

To find out more about Bishop Sullivan, visit: bishopsullivan.co.uk