Is this quite what the Chancellor had in mind?

Published 25 November 2016

Jan Hytch

Jan Hÿtch- Operations Partner

Whilst we do welcome extra money for new housing, affordable homes, and infrastructure to support new developments, the headline property measure in the Autumn Statement was the proposal to ban the charging of fees to tenants by lettings agents. So keen was the Chancellor to make a dramatic statement, he failed also to add that his gesture was still subject first to consultation, then a written proposal (or Bill)  to be presented and debated, before approval or otherwise by parliament and the Queen, before eventually becoming law. So in fact letting fees will still be payable until at least the middle of next year, whilst this process takes place.

If you are to believe some media reports, these fees are simply levied arbitrarily to generate extra profits.  That of course is not true. The checks are there to cover the actual costs of checking out prospective tenants; ensuring they have the right to take a tenancy in the UK, and that there is no criminal or financial reason why a landlord might not agree to let to a tenant. Ironically the reason for this is due to other regulations already imposed on landlords and agents by the government itself - for example ‘right to rent’ verification to prove citizenship and eligibility to occupy. So paying for professional external credit and security checks in order to obtain that information has a cost attached, and letting agents do not have the option of choosing not to carry out these checks – it is now a legal obligation - and because the checks are time-consuming and costly, no business can afford to do them for free.

So the costs involved will still be there, and when the time comes when letting agents are not able to recover them from tenants, those costs will be passed to landlords, who in turn will need to recoup them elsewhere, inevitably through higher monthly rents over the first year of the tenancy.  Which means instead of paying the fee once up front, the tenant who stays in their property for two or three years may well be paying the fee over again every year, through the higher rent.

So the crowd-pleasing soundbite in the Chancellor’s statement isn’t the gift to tenants that it sounded like, and will most likely lead to extra costs for tenants. I’m not sure that was quite what he had in mind.

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