During its Autumn Statement on Wednesday, the Government announced that it would be banning letting agents’ fees being charged to tenants. These fees are charged over and above rent and a deposit and can cost tenants £200-£700. Typically, these fees cover administration checks such as signing a tenancy agreement, referencing checks and renewal fees.
On the face of it, this comes as a welcome change for tenants. However, will it actually benefit tenants in the long run? Who will end up footing the bill?
The buy to let industry has increased dramatically, with many Landlords making a steady income from renting out properties. Although some Landlords manage their property themselves, many do instruct letting agents to manage the property on their behalf. Letting agents, come fees.
The fees must be paid by someone and if there is a ban on charging tenants, who will foot the bill? Inevitably, Landlords are concerned that they will have to bear this initial cost. However, tenants are worrying that their Landlords will look to recoup this cost through the rent. This could see an increase in market rents making it more difficult for tenants to afford to rent.
Similar changes are already in place in Scotland, and the BBC reports that in fact rents do not seem to have increased. In fact, according to the BBC’s reports, some Scottish letting agents have said that in fact they have had to absorb the cost themselves.
The government is yet to consult on how exactly the ban will come into force and it is not clear whether the changes would happen immediately or in the future. It is likely however that Landlords are going to be burdened with this cost. This comes as another hit to Landlords following the recent announcement of income tax changes to rental income. However, this could also affect letting agents with Landlords more likely to consider managing the properties themselves to avoid the cost of paying a middleman.