While discussing details of his budget the Chancellor of the Exchequer made a point of highlighting changes in the letting agents system in the UK. In the future letting agent fees for tenants will be banned which has obviously gone down well with those looking to rent property. If you check any letting agent website you will see an array of charges, often charged an annual basis, for relatively regular actions such as name changes on a lease, renewal of a lease, inventory checks, credit checks, etc. Is this a sensible move by the UK government or will the net impact be absolutely zero?
Proposals out to consultation
Governments of the day often like to grab the headlines with unexpected and potentially voter friendly changes such as the abolition of letting agent fees. A recent report suggested that these fees add around £340 per annum to the cost of letting a property although some reports suggest it could be much higher. It will be interesting to see what kind of feedback is received from the letting agents sector as well as landlords and rental markets.
There will obviously be an array of different opinions although many will have a vested interest in shouting loudest.
Is this a fair move?
There have been concerns in the marketplace that landlords pay both letting and management fees and these fees should already incorporate those which are being charged to tenants. Whether there is any “double charging” is debatable but if letting agents are banned from charging tenants additional fees then they will simply pass these on to landlords. So, what will landlords do when they are hit with additional charges?
The simple fact is that landlords will be looking to maintain their current net income from properties and therefore any additional charges from letting agents will simply be passed on to tenants in the form of increased rent. At the end of the day, while the government is looking to grab the headlines and help those “just about managing”, this is to all intents and purposes a red herring. Also, let us not forget that letting agents do actually offer a valuable service, one which brings landlords and tenants together – and help maintain a long term relationship.
Competition in the letting agents sector
There is no doubt that this move, if eventually rubberstamped after consultation, will increase competition in the letting agents sector. This is already an extremely competitive sector due to the number of properties for rent in the UK but competition will certainly increase. Whether we will see a reduction in the standard of services offered by letting agents remains to be seen, especially if landlords are unwilling to take on any additional charges. It may be that more landlords will seek out tenants themselves thereby missing out the letting agents. However, due to the potential complications of lease agreements, etc, this may turn out to be a false economy for many.
What next for the buy to let market?
Even though the government is wrapping up this particular move as an attack on the letting agents sector, landlords and tenants will also suffer. There will simply be a transferral of cost back to the tenant, or at least as much as possible, which will ultimately increase the headline cost of renting property in the UK. This is just the latest in a whole raft of new legislation aimed at the buy to let market at a time when rental property is often at a premium in the UK.
Why has the government decided, yet again, to attack the UK property market at a time when the UK is in dire need of investment in housebuilding and homes to rent?