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

  • 2 years ago
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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 has been suggested by Shelter that Letting Agents are exploiting tenants on agency referencing and sign up fees. 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. Of course, letting agents have resisted calls on a total ban, believing instead that charges should be limited by way of compromise and made much more transparent.

As predicted by ARLA, a ban on tenant fees will simply mean an uplift in rent to cover additional charges which in the long term will mean tenants will lose out financially vs paying a reasonable tenant fee at the start of the tenancy. 

The truth is that given the fact so much demand on housing is spilling over into the private rental sector, the ban will place even more pressure on rents to increase faster than perhaps they would should a compromise on fees been reached. 

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