During their autumn statement, given to Parliament earlier today, the Conservative Government has announced a ban on letting agent fees, usually charged to tenants when they apply to let a private rental property. We do not believe this is the right decision for tenants, or in fact landlords. We worry for tenants that in some way, these costs will be passed on by landlords with rent increases in the future.
I would estimate that the work involved in processing a prospective tenant’s application to let a property is approx. 6 hours, and includes, but is not limited to some of the following work:
- Our staff attendance at individual (not block viewings) often outside of normal office hours
- Interviewing of the prospective tenants, to ‘get a feel’ for them and their current situation
- Processing of credit checks, electoral roll, written current landlord reference, written employment reference, bank references, ID verification and checking their ‘right to reside’
- Drafting of their tenancy agreements, taking their first month’s rent, tenancy deposit and submitting that deposit to the government backed deposit scheme and issuing the relevant information relating to that scheme (www.depositprotection.com)
As you can see, all of this work is well in advance of us recommending any prospective tenant to our valued landlord clients. Our landlords trust us to be as thorough as we possibly can, before we hand over the keys of their property, often their most valuable asset, to any future tenant.
Another important factor to be considered is, that without a fully qualified and vetted tenant, landlords cannot fully insure their property against loss of rent, or for the ensuing legal fees of regaining possession, so getting the reference checks right is a vital piece of the renting jigsaw.
Letting agents like Jacob’s Ladder use their commercial judgement, based on many years of experience to ensure they get this right, and although referencing is no guarantee of the future performance of a tenant, it is a very detailed snapshot of them at this moment in time. We cannot simply believe everything we are told by potential tenants, and hand over the keys!
We only charge tenants an upfront administration fee when we have decided who to proceed with, following the initial interviewing process. We do not levy fees on all interested parties, as that would be unethical.
The fees landlords pay to letting agents is for a completely different set of services provided, which ranges from the advertisement of their property on rightmove, and our own website, installation of ‘to let’ boards outside their properties, the ongoing setting up of their tenancy and the ongoing management of their property, such as dealing with property inspections, repairs and maintenance, rent collection and accounting, and chasing of any arrears, and issuing any relevant notices to evict tenants as and when the time arises.
The amount of legislative changes letting agents have to keep abreast of are mind boggling, and landlords trust us to get it right on their behalf, so they can enjoy the process and the profits of being a landlord.
Landlords must bear the financial burden of maintaining their properties, servicing the associated debts, and keeping the relevant safety inspections and insurances up to date. Many landlords are not making big money, they are simply servicing their investment, and hoping that at some time in the future they may make some profit.
We are now very concerned at this development, and wonder who will pay for the important, upfront vetting that must be done on prospective tenants. We certainly will not allow tenancies to be offered without that important vetting, and our landlord clients would not expect us to do so. But are we as letting agents expected to provide that service for free, or to bear the financial burden of vetting potential tenants?
We believe, this government has not thought this decision through and will be watching how the situation develops very closely indeed.