Industry News

Letting Agency Business Tenant Fees and Set Up – England and Wales

Following the charity Shelters supposedly successful campaign in Scotland where it created so much noise, it managed to persuade Scotland to clarify a pre-existing law in order to stop letting fees being charged to Tenants at the beginning and/or throughout a tenancy.

Shelter have advised the public that this is a success in Scotland which will save Tenants in the country millions of pounds, however there is growing evidence to suggest that whereas a new Tenant may save £150-200 by not having to pay a letting agent or landlord a one off administration letting fee at the start of their tenancy letting, agents will have no choice but to recommend to landlords a higher rent, so that the management fees charged will help letting agents take back the fees that have unfairly been taken away from them. As agents in England and Scotland on average take 10% in monthly rental management commissions, it would mean that rents may increase by between £1500.00 to £2000.00 a year in Scotland. If this theory is correct, it shall place even further pressure household expenditure and drive up inflation.

It has been suggested by Shelter that Letting Agents are somehow charging well over the odds when it comes to making an administration charge to create a Tenancy. For example they have used the argument that a credit check only costs £6.00, yet an agent will charge £150.00. This may be the cost of the actual check, however this doesn’t cover the cost in time for preparing paperwork to be sent to the Tenant, liaising with a Landlord on whether an application should be accepted, answering Tenant queries and preparing a check in, liaising with the Tenant on the inventory and what additions to it may be required, ringing previous landlords and the tenants employer for referencing etc.

If you compare this to a solicitor, where it is quite common to expect a charge of a few hundred pounds just for a template letter, can you imagine if a charity suggested people should only pay for the cost of their paper and ink. The point is that on the whole, Tenants do receive value for money from their letting agent, and the insinuation made by Shelter that letting agents are somehow rolling in it as a result of over charging is entirely false and misrepresented. People should be encouraged to ask what Shelters real motives are.

The banning of tenant agency fees will certainly help make Shelters job easier in being able to house vulnerable people and those who are homeless. Of course, Shelter will make more money for not having to subsidise letting agent fees and will perhaps be more successful in being able to house more people. When rents go up, this will not be their problem but rather the government and the working tax payer instead.

The truth is that given the fact so much demand on housing is spilling over into the private rental sector because the previous government destroyed so many council houses, the government really should be supporting letting agents, rather than working against them, as getting this policy wrong has the serious potential of backfiring significantly. Starting a letting agency is however becoming ever more popular given the rise in demand across the board and this is for a variety of reasons, however is mostly due to a straight forward lack of accommodation to support a fast growing population.

The good news of course, is that Shelter have been warned that whereas they may have had success in Scotland, wasting tax payers money in England and Wales on such a campaign would fail as the law they pinned their argument on in Scotland, simply does not exist in England and Wales.

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