Letting agents

Autumn Statement 2016: Letting agent fees banned




Philip Hammond has revealed that tenants will no longer have to pay letting fees with these costs instead being passed on to landlords.

The chancellor of the exchequer outlined the changes during the Autumn Statement, where he also revealed new housing and venture capital funds. 

Explaining his decision, Mr Hammond stated: “In the private rental market, letting agents are currently able to charge unregulated fees to tenants.

“We have seen these fees spiral, often to hundreds of pounds.

“This is wrong. 

“Landlords appoint letting agents and landlords should meet their fees.

“So, I can announce today that we will ban fees to tenants as soon as possible.”

Industry reaction

John Goodall, CEO and co-founder of Landbay, said it was good to see the government was finally recognising the importance of the private rented sector, but questioned whether scrapping letting charges would be good for tenants.

“Landlords will have little choice but to absorb letting agent fees themselves and, in time, will pass these on to tenants. 

“Scotland has already gone down this route, removing the fees back in 2012, and although there are a lot of moving parts in play here, it saw rents grow by 1.55% over the past 12 months, the fastest growth of all of the UK home nations. 

“It’s a start, but the fact is rents are likely to rise faster than house prices over the next five years, so the overall outlook for tenants is still bleak. 

“What would really help those just about managing to climb on to the property ladder, is a bold but realistic commitment to encourage the expansion of rental housing, which would help maintain affordable rents.”

Ian Thomas, co-founder and CIO of LendInvest, also questioned the decision.

“Landlords will be squeezed from yet another angle, while many tenants will eventually foot the bill. 

"Letting agents should be expected to account for the fees they charge, not pass the cost of the work they do to landlords. 

"The government cannot drive forward its strategy for productivity if it doesn't create a mixed-tenure property market that's truly fit for purpose. 

“Until we fix the housing crisis, nurturing a healthy rental market is as important as helping more people to own their own homes."

Islay Robinson, CEO of Enness Private Clients, felt that the move would also deter investors from entering the buy-to-let market and reduce housing stock.

“Would-be landlords have already been discouraged from entering the market, thanks to the extra 3% stamp duty incurred on buy-to-let properties and reduced tax allowances, and this is a move which further deters this type of investment. 

“With home ownership still a key issue and unattainable [for] many, we should be encouraging this type of tenure, not attacking the market further. 

“Furthermore, this will not be a saving that the tenant sees in the long run. 

“They will incur this additional cost, albeit not upfront, because the landlord will likely increase rental values in order to cover this fee.

“A more positive move would have been to regulate these fees, ensuring fairness across the board, rather than simply shifting the charge to landlords.”

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