Earlier this week the Chancellor Philip Hammond announced in his Autumn Statement that fees charged to tenants by Letting Agents were to be banned (although when this will take effect from was not disclosed). This had been actioned in Scotland in 2012 and was considered to have been a success (questionable at best, do read on).
The fallout on this issue within the industry, and amongst the campaigners looking for the ban in the first place, has been considerable, but why is it so important? and why will it have wider implications than just to the tenant who will now "save money"?
Let us bear in mind that the main parties wanting this ban were tenants and charity/housing organisations, and their voices were shouting louder than the lettings agents and landlords.
Almost everyone I have spoken to within the industry, be it agent, journalist, trainer or service provider, has been against it. Now you might expect that, given that agents can no longer make what is often wrongly perceived as a nice little earner with so many believing it is little more than an extra "tax" to tenants, but the issue is so much bigger than that.
I'm not happy about it, and this is why.
Most agents try to do things properly, and charge reasonably for their work. Not all admittedly, even in my private rental arrangements in recent years I have had to pay out what I consider excessive amounts. My view, and therefore that of the company I run, is not to charge to excess first time around, given that if you alienate a customer first time around by overcharging, you aren't likely to see that customer again in the future. As a smaller independent business, and someone who lives locally, and buying, selling or renting property is a basic human requirement never likely to disappear, repeat custom is encouraged for us to help us grow. Our approach is therefore to be reasonable, and to look medium/long term rather than grab every penny now.
Our tenant admin fees, or however you care to word them, are the lowest in town.
But sadly, estate agents in general don't have a good image, some agents give us a bad name and the minority ruin it for the majority. The issue of tenant fees is no different. That's why the ban is here basically, because a minority of people have been taking the mickey, and now we must all suffer. And by all I mean YOU, not just myself and my colleagues.
And that is because whether you are a tenant or a landlord you will suffer financially as a result of this pending legislation.
If you are a tenant, you might save a small amount in up front fees now admittedly, but if that impacts on higher rents on a monthly basis then over the term of your tenancy you are likely to be worse off in the long run. How so? Well the loss of income from an agent in tenant fees is more than likely to be passed to landlords by the majority of businesses, and therefore the landlord, already being hit by tax law changes in the last 12-18 months hitting their profit margins, are probably going to be of the opinion that rents must go up.
Alternatively, your landlord might decide that with all these changes in the rules, that being a landlord isn't so profitable any more, and will sell up. The reduction in supply to the market will mean more competition for the remaining properties, and as with any supply and demand situation, that is only going to drive prices one way.
If you are a landlord this will absolutely effect you within the next 12 months when you are next looking for a tenant. Why? because when we ask a tenant for a holding fee on a property, we are securing their commitment that they will not change their mind. We are safeguarding against the time wasters, the mind changers and the referencing failures. That inability now to take a holding fee from a tenant which they risk losing, means the tyre-kickers messing agents and landlords around will have free rein, and that isn't good for landlord, agent, or serious tenant.
More wasted time by me and my staff, and you the landlord, and less security by way of a financial commitment from the tenant, will increase risk that you have a void period, or there are delays, or additional work from referencing numerous tenants to safeguard against a potential failure. And this all costs time and money, and if the tenant isn't paying, who is?
Agents still have a business to run, and costs to pay, so if the cost isn't being partly covered by the tenant, where will it be made up? Would that be in the agent raising their fees chargeable to landlords - not likely, that won't go down well. Or will the agent suffer the loss, but then will that effect service levels, or lead to corner cutting, and neither of those are sensible either. It's a problem waiting to happen.
Rents WILL GO UP
The harsh reality is that landlords WILL increase rents, not instantly, but inevitably. Combined with the other changes in legislation in recent years landlords are not making the money they used to, and whilst you might not like to hear it, 99% of landlords do so to make money. They don't rent you their property out of kindness! and another issue working against them might mean that £50pcm goes on the bottom line, and that over the term of a tenancy is a lot more than the agency fees up front would have been to the tenant.
Why not regulation rather than a ban?
This all stems from what I consider poor regulation. The laws for estate and lettings agencies are infinitely better than they were when I started 11 years ago, but there are still huge gaps and/or loopholes that sadly some types of people will look to exploit.
Hearing stories of people being charged £25 for a photocopy of a tenancy agreement, £90 for the privilege of moving in on a weekend, or £100's for referencing, guarantors, check-ins etc etc, especially in London, it isn't difficult to see why there is a problem.
But for me the solution is a capping of charges, and not a removal of them. For, as mentioned above, without a fair and reasonable charge, I will undoubtedly have my time wasted, and ultimately that will cost a landlord and a vendor somewhere down the line - and most probably a lot of tenants too.
If you are looking for an agent that is well established, professional and communicative, then contact us to find out how we can get the best out of your investment property.
Email me on kevin@dansonpropertyservices.com or call on 020 3397 4499. If you are in the area, feel free to pop into the office – we are based on 116 High Street, Welling, Kent, DA16 1TJ. There is plenty of parking and the kettle is always on.
Don’t forget to visit the links below to view back dated deals and Welling Property News.
Follow The Buy-To-Let Property Investment Market in Welling
Welling Property Market LinkedIn Page
Danson Property Services Welling Facebook Page
Danson Property Services Welling Twitter Page
Welling Investment Property Specialist Danson Property Services Website
Let us bear in mind that the main parties wanting this ban were tenants and charity/housing organisations, and their voices were shouting louder than the lettings agents and landlords.
Almost everyone I have spoken to within the industry, be it agent, journalist, trainer or service provider, has been against it. Now you might expect that, given that agents can no longer make what is often wrongly perceived as a nice little earner with so many believing it is little more than an extra "tax" to tenants, but the issue is so much bigger than that.
I'm not happy about it, and this is why.
Most agents try to do things properly, and charge reasonably for their work. Not all admittedly, even in my private rental arrangements in recent years I have had to pay out what I consider excessive amounts. My view, and therefore that of the company I run, is not to charge to excess first time around, given that if you alienate a customer first time around by overcharging, you aren't likely to see that customer again in the future. As a smaller independent business, and someone who lives locally, and buying, selling or renting property is a basic human requirement never likely to disappear, repeat custom is encouraged for us to help us grow. Our approach is therefore to be reasonable, and to look medium/long term rather than grab every penny now.
Our tenant admin fees, or however you care to word them, are the lowest in town.
But sadly, estate agents in general don't have a good image, some agents give us a bad name and the minority ruin it for the majority. The issue of tenant fees is no different. That's why the ban is here basically, because a minority of people have been taking the mickey, and now we must all suffer. And by all I mean YOU, not just myself and my colleagues.
And that is because whether you are a tenant or a landlord you will suffer financially as a result of this pending legislation.
If you are a tenant, you might save a small amount in up front fees now admittedly, but if that impacts on higher rents on a monthly basis then over the term of your tenancy you are likely to be worse off in the long run. How so? Well the loss of income from an agent in tenant fees is more than likely to be passed to landlords by the majority of businesses, and therefore the landlord, already being hit by tax law changes in the last 12-18 months hitting their profit margins, are probably going to be of the opinion that rents must go up.
Alternatively, your landlord might decide that with all these changes in the rules, that being a landlord isn't so profitable any more, and will sell up. The reduction in supply to the market will mean more competition for the remaining properties, and as with any supply and demand situation, that is only going to drive prices one way.
If you are a landlord this will absolutely effect you within the next 12 months when you are next looking for a tenant. Why? because when we ask a tenant for a holding fee on a property, we are securing their commitment that they will not change their mind. We are safeguarding against the time wasters, the mind changers and the referencing failures. That inability now to take a holding fee from a tenant which they risk losing, means the tyre-kickers messing agents and landlords around will have free rein, and that isn't good for landlord, agent, or serious tenant.
More wasted time by me and my staff, and you the landlord, and less security by way of a financial commitment from the tenant, will increase risk that you have a void period, or there are delays, or additional work from referencing numerous tenants to safeguard against a potential failure. And this all costs time and money, and if the tenant isn't paying, who is?
Agents still have a business to run, and costs to pay, so if the cost isn't being partly covered by the tenant, where will it be made up? Would that be in the agent raising their fees chargeable to landlords - not likely, that won't go down well. Or will the agent suffer the loss, but then will that effect service levels, or lead to corner cutting, and neither of those are sensible either. It's a problem waiting to happen.
Rents WILL GO UP
The harsh reality is that landlords WILL increase rents, not instantly, but inevitably. Combined with the other changes in legislation in recent years landlords are not making the money they used to, and whilst you might not like to hear it, 99% of landlords do so to make money. They don't rent you their property out of kindness! and another issue working against them might mean that £50pcm goes on the bottom line, and that over the term of a tenancy is a lot more than the agency fees up front would have been to the tenant.
Why not regulation rather than a ban?
This all stems from what I consider poor regulation. The laws for estate and lettings agencies are infinitely better than they were when I started 11 years ago, but there are still huge gaps and/or loopholes that sadly some types of people will look to exploit.
Hearing stories of people being charged £25 for a photocopy of a tenancy agreement, £90 for the privilege of moving in on a weekend, or £100's for referencing, guarantors, check-ins etc etc, especially in London, it isn't difficult to see why there is a problem.
But for me the solution is a capping of charges, and not a removal of them. For, as mentioned above, without a fair and reasonable charge, I will undoubtedly have my time wasted, and ultimately that will cost a landlord and a vendor somewhere down the line - and most probably a lot of tenants too.
If you are looking for an agent that is well established, professional and communicative, then contact us to find out how we can get the best out of your investment property.
Email me on kevin@dansonpropertyservices.com or call on 020 3397 4499. If you are in the area, feel free to pop into the office – we are based on 116 High Street, Welling, Kent, DA16 1TJ. There is plenty of parking and the kettle is always on.
Don’t forget to visit the links below to view back dated deals and Welling Property News.
Follow The Buy-To-Let Property Investment Market in Welling
Welling Property Market LinkedIn Page
Danson Property Services Welling Facebook Page
Danson Property Services Welling Twitter Page
Welling Investment Property Specialist Danson Property Services Website
