Thursday, May 8, 2014

Even more breaking good news.

Labour to call Commons vote on letting agent fee ban

Labour are to call a vote in the Commons in an attempt to ban letting agents from charging fees to tenants. Party leader Ed Miliband said people who buy a house are not charged fees by agents, but people who rent are. He said Labour was "determined to stand up for generation rent" and deliver an "immediate financial benefit" to people who do rent. The Association of Residential Letting Agents said it was "deeply concerned" by Labour's proposals. The challenge we have today is an unregulated market and a worrying lack of supply” Labour will table its proposal as an amendment to the Consumer Rights Bill in the Commons on Tuesday. Under the party's plans estate agents would no longer be able to charge a letting fee for renting out properties.

Posted by khards @ 01:11 PM (2858 views)
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13 thoughts on “Even more breaking good news.

  • Cost will go to landlords, who will pass the cost onto their tenants.

    Typical Labour shortsighted thinking.

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  • Well judging on the massive range of costs between agents for identical service and their fight against the ASA’s demand that they include fees in their advertising, what I imagine will happen is they will attempt to pass the cost onto the landlord, who will vote with their feet against those trying to pass on the highest fees (Foxtons currently change tenants £420 + VAT). So sure the cost will be passed onto the tenant, but with much more transparent pricing, the cost will be driven down.
    So much of industry is banned from opaque pricing this is a no brainer. Airlines had to be legislated against when they advertised prices that bore little relation to what had to be paid. I’d struggle to find anyone who could seriously argue that we should return to the days of a Ryanair flight advertised for £29.99 but with compulsory taxes and fees of double that.

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  • If landlords could pass on the cost to tenants, wouldn’t they already be charging and extra £500 in rent? If not then why not?
    You could argue that they cannot charge the extra because the tenants already gave it to the letting agents. In reality it’s more likely to affect Wonga and pay day loan services which are often used to cover agents fees.

    Are the DSS going to increase housing benefits budget from £21bn to cover the newly increased rents? Thought not.

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  • If landlords could pass on the cost to tenants, wouldn’t they already be charging and extra £500 in rent? If not then why not?

    Because they don’t yet have the justification.

    Are the DSS going to increase housing benefits budget from £21bn to cover the newly increased rents? Thought not.

    Not all people renting are DSS….most landlords don’t want DSS.

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  • Market forces prevent estate agents from passing these fees onto landlords because they won’t want to pay unless the estate agent can demonstrate some value. i.e. what am I purchasing for this expense? Market forces will ensure that this will have minimal impact on rents. It is relatively easy to pass the expense to a prospective tenant because its a circus out there and tenants often find they are forced to proceed or risk not having a home, landlords can just get a better deal from the agent next door. More likely estate agents will need to look at business expenses i.e. be more efficient, to manage the loss of income. Flash cars, leaflets, gaudy kipper ties, shiny suits and employees come to mind……

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  • Utterly ridiculous. First, agent fees are a tiny proportion of overall outgoings. Second, if Landlords have to pay fees upfront, they will be less likely to let properties and would simply translate this into higher rentals. Thirdly, tenants can already shop around with different Agencies and avoid those that charge sky high fees.

    Yes, Letting Agents are not our best friends BUT, why do we and landlords use them? It is because they provide a service that both parties want. Renters do not want to have to phone hundreds of landlords, they want a collated list. Renters do not want to do all the due diligence like inventories, etc. Neither to landlords.

    Always and everywhere, price controls result in shortages.

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  • “Second, if Landlords have to pay fees upfront, they will be less likely to let properties and would simply translate this into higher rentals”

    What are they going to do? Keep their property empty so they don’t have to pay the letting agent fees? Ridiculous!

    You know how tight landlords are (won’t even spend £20 to fix leaking taps). I’s most likely that they will undertake the referencing and contract copying themselves and somebody (rightmove?) will set up a website where they can punch in a few basic tennants details and property details.

    Letting property is not rocket science and the landlords business costs incurred should be paid by them an not the tenant + the landlord can claim back VAT on the costs, where as the tenant can’t.

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  • ‘Utterly ridiculous. First, agent fees are a tiny proportion of overall outgoings.’

    I don’t agree that the £400+ charged to tenants by Foxtons is a tiny proportion of outgoings especially considering the timing of the charges (when the tenant is under pressure to agree the deal)

    ‘Second, if Landlords have to pay fees upfront, they will be less likely to let properties and would simply translate this into higher rentals.’

    Landlords will shop around for the best deal and market forces will win out

    ‘Thirdly, tenants can already shop around with different Agencies and avoid those that charge sky high fees.’

    Tenants are under pressure to secure a tenancy within limited time. Often just days aways from being technically homeless. Also, letting agents ‘hard sell’, telling potential tenants that they have already shown dozens of interested parties/it wil go later today etc. Securing a home is an emotional experience for many, letting agents charge these fees at the point of sale to exploit the upper hand they have in the transaction.

    I also do not agree that tenants don’t want to phone hundreds of landlords. They don’t because they can’t. Practically all lettings apart from a handful on Guntree are exclusive via lettings agents. I do agree that they provide a service but that is for the landlord not the tenant and that is why they should either look to the landlord to pay expenses or review their operating model to account for the loss of this income e.g reduce internal expenses like the rest of us do

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  • I’m with khards, this is definitely a good thing.

    In any case, the landlords will struggle to pass on a fixed cost (the renewal is normally a fraction of the price) as a monthly one. Most people don’t really think about the fees. Some people avoid certain agents because of them, but to most, it’s just a part of a lump sum they pay including the first month’s rent and the deposit. A few weeks after moving in, they get their old deposit back, but it never occurs to them the package was a few hundred quid light by default.

    I doubt it factors in on their decision to bid on rent (as opposed to council tax, for example), as it’s a one-off cost, whereas rent is the most significant part of their monthly budget.

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  • @Skippysb

    Near me, iamtheagent is better for private lets than Gumtree. You don’t have to filter out the agency ads either, it’s just private LLs.

    You’re completely right, though. Tenants will read the MSE page on fees and tell themselves they won’t register with Foxtons, but when they’ve got 2 weeks left on your current tenancy and Foxtons have most of the decent flats, you make the call.

    I told my wife to avoid them this time, but she got seduced by several standout listings. Once they had her number, five nearby branches proceeded to call her every day for 6 weeks to tell her about flats 60% over our budget in neighbouring areas, suggesting we should view them anyway as the landlord “would take an offer”.

    My experience is that everyone at every level of affordability has this experience with them: you tell them what they can afford and they only show you stuff 30%+ more than that. The £400+ fees are just the coup de grace.

    It’s all quite cunning, really. If you want to be the agent that’s known for getting more, you have to bleed everyone for more than they ever set out to spend, even if that means not telling people about flats that meet their requirements exactly.

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  • britishblue says:

    Agree with Khards. In my area of Surrey/London property prices are up 20% in the last year, but rents have hardly moved. This will mean a 20% less yield for any new buy to let lanlords. Tenants are not just a bottomless pit to extract money and rents cannot simply be bubbled up. In fact many tenants I know have already had to move to worse accommodation as they haven’t been able to afford increases in rent and basic costs. I would say that tenant rent is maxed out in London and house price increases can’t simply be passed over to them. There is also some downward pressure on rents in London, because of changes with the social. A few years back private landlords would take people on the dole, because the rent was guaranteed and they could extract a high price. Now because rents are being capped this is meaning that people on the dole are moving out to less pricier areas and landlords aren’t renewing their tenancies with them. This was one of the key reasons why average housing was so expensive to rent as previous governments were putting a safety net under buy to letters with housing benefits. 25% of London is subsidised housing, so this will have an impact on how much landlords can extract.

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  • letthemfall says:

    Kh, R, and BB are right. Rents are transparent and priced according to the market. Increasing landlord costs would not make any difference to rents. It might possibly mean they pull out of letting (unlikely) but that would be a good thing wouldn’t it? It’s a good policy – one less ripoff on the poor tenant.

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  • First, agent fees are a tiny proportion of overall outgoings.

    If you’ve ever looked into this, they can be pretty high. Most letting agents fees have two tiers:-
    1. Interviewing prospective tenants & full inventory
    2. Full maintenance management

    No. 2 can be be pretty expensive.

    Letting property is not rocket science and the landlords business costs incurred should be paid by them an not the tenant + the landlord can claim back VAT on the costs, where as the tenant can’t.

    Most BTL’ers simply don’t want the hassle. Moreover, they may live many miles away from the property they rent and simply aren’t able to keep an eye on what is going on.

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