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Banishing Letting Agents Fees Will Help Make Private Renting A Little Less Terrible

29/11/2016 16:45
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Lettings agency fees are very near the top of my mind at the moment. I'm currently moving for the second time this year, which means that in the last nine months I'll have paid well in excess of £500 for the privilege of having someone run a reference check and photocopy a contract. The cost of agency fees over more than a decade of renting must stretch well into the thousands.

Renting in the private sector is precarious. Tenancies last no more than six to twelve months, and landlords can evict tenants for no reason at two months' notice. By 2020, a third of Londoners will rent from a private landlord, and it is already the dominant tenure for younger people.

It's bad enough having to fork out for six weeks' deposit before you get your last one back. Having to find an average of £337 in lettings agency fees only adds to the pressure on tenants' finances and can lead to increasing debt.

Therefore it's welcome that the Government has announced it will finally banish letting agent fees.

This is somewhat of a Damascene conversion for the Conservative Party, which dismissed Labour's 2015 manifesto pledge to implement a ban. In late September Gavin Barwell said a ban on the charges was a "bad idea" during a discussion about housing on social media. But I suppose there's more joy in heaven over the sinner that repents.

Lettings agents have responded with plenty of scaremongering. Their standard response is that if fees for tenants are banned agents would simply have to charge landlords more, which would push up rents.

Even if that were true, speaking as a private tenant I'd rather pay a little extra per month in rent than a whacking upfront fee to have someone change the name on a tenancy agreement.

But if they really believed that a ban would lead to higher rents for tenants they'd be sanguine about the whole thing. Their howls of anguish betray the truth: they're concerned about their profit margins, not higher rents for hard pressed tenants.

Research from Shelter shows that the ban on fees in Scotland has not led to a rise in rents. Tenants don't choose lettings agents, landlords do. They can gouge tenants because if you want the flat, you have to accept the fee they present you with. Competition is minimal. However, landlords can shop around for a cheaper deal in a way that tenants can't. Lettings agencies know this full well.

Shareholders would seem to agree with me. Foxtons' share price dropped 10% on the announcement of the ban, and other agencies saw falls in their share price too. This doesn't suggest they're confident they can just shove the cost onto landlords.

What lettings agents claim is that both the landlord and the tenant are their clients, and equally so. This is a legal nonsense, as explained on the Nearly Legal blog.

I know of a recent case where the lettings agency tried to add an extra fee of more than £100 midway through the process. When it was pointed out to them that it had been illegal not to advertise all agency fees up front for several years they quickly cancelled it. Those unfamiliar with housing law wouldn't have been so lucky. Tenants are not always aware of their rights or feel they are in a position to negotiate. Light touch regulation has clearly failed, and the government must ensure that their ban on fees really is a full ban, with no loopholes that could be exploited.

Renting in the private sector in Britain is unstable and increasingly unaffordable. Let's do away with these exorbitant fees once and for all and make life a little easier for private tenants.

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