Andrew Ellinas, Director, Sandfords (estate agent in Marylebone and Regents Park)
“The news that the government is banning letting agents fees to tenants as soon as possible and that landlords should meet those fees, has left me struggling to see how that’s fair. Granted there are some letting agents charging unreasonable fees, but on the whole tenants have simply been paying for a service required in order to rent a property. The devil will be in the detail, but it would seem that this is the latest move to hit landlords who are now facing increased costs.
“Looking at the different principle fees tenants currently pay, it’s difficult to see how they are going to be charged and to justify why landlords should pick up the bill. For example, referencing fees. Tenants have to be referenced, but if they subsequently fail those checks, preventing the tenancy from going ahead, who pays that fee?
“What about inventory checks. How can you now expect the landlord to pay for the inventory at the beginning and end of a tenancy, it doesn’t make sense. A tenant pays for it on the way in for their own peace of mind and the landlord once the tenancy has ended so that they can check everything is still there and in good condition.
“This could have a real impact on the London rental market. UK and overseas landlords will not welcome this news and will look to recover their incurred costs elsewhere. Tenants may avoid a fee at the start of the tenancy, but there will be an unavoidable outcome of higher rents for them to pay.”
Eddie Hooker, CEO of Hamilton Fraser (parent company to Total Landlord Insurance)
“We, of course, support raising standards in the Private Rented Sector and initiatives to push out rogue letting agents, but we have concerns that an outright ban may have the unintended consequence of pushing up the already heavy burden of rents on tenants, especially in high demand areas. We called for additional enforcement to drive up standards in the industry only recently, but fear this is a step in the wrong direction and could in fact have an adverse effect.
“This ban will increase costs on landlords who are trying to plug the gap in a difficult housing market. Parts of these costs are likely to be passed back to the tenant through increased rents as a result. It could also have a negative impact on the rental market as a whole with possible office closures and some agents having to shut up shop entirely.
“In addition, the Chancellor announced that insurance premium tax will rise from 10% to 12% next June and this will also have ripple effects for our industry. Paying a higher premium on essential cover, such as buildings and contents insurance could mean that some people avoid taking up insurance leaving them unprotected.
“Other measures should have been addressed by the Chancellor to help stimulate the market following Brexit, such as reversing the additional stamp duty on buy-to-let properties and second homes for landlords.”
Paul Shamplina, Founder, Landlord Action
“Although there had been some whisperings, confirmation of this announcement will be a big shock to the industry. It is realistic to assume that the ban on letting agent fees to tenants, which will leave a black hole in agents’ profits, will need to be partly recuperated through letting and management fees. At the end of what has already been a tough year for landlords, and with uncertain times ahead, agents hiking up fees could be the final straw for some landlords and see them exit the private rented sector. Those that wish to hold onto their rental properties will have to increase rents in order to cover their costs. We could even see a surge of landlords opting to self-let and manage, which I believe will have a detrimental effect on rental property standards.
“Agents will need to be forward-thinking about how they can absorb some of this cost and the loss through other areas of their business. It has never been more vital for agents to educate less experienced landlords on the importance and benefits of a managed service, making sure they are compliant with industry legislation and preventing them from exiting the PRS altogether.”
Nick Davies, Head of Residential Development at Stirling Ackroyd
“Sadly the Autumn Statement was a let-down for first time buyers and for Londoners. It seems Starter Homes have been put on the back burner, and the government failed to take decisive action on stamp duty, ducking the opportunity to get the market moving. First time buyers already find it almost impossible to save for their deposit without the help of relatives and this Autumn Statement has done nothing to cut the cost. The top of the market is also flat thanks to the government’s reforms, with landlords also being pushed out of the market by the 3% surcharge.
“The reality of the government’s decision to ban letting fees is that it will only result in landlords passing the bill on to tenants through higher rents. Landlords have already been stung by the stamp duty surcharge and the end of mortgage tax relief, and so it is difficult to see them doing anything other than push the burden back on to Generation Rent. Hitting landlords with extra costs only leads to fewer properties available to rent in the longer term, meaning even greater competition and higher rents. The only solution to the housing shortage is to build more homes and free up public sector land for housebuilding.
“While the Housing Infrastructure Fund should benefit London, there was no news on specific projects for London like Crossrail 2, the Bakerloo line extension, or river crossings in the east of the capital, which would open up new parts of the city for housebuilding and development. At the current rate it will take years for these mega-projects to be delivered – while in the meantime the prospect of homeownership in London will only become even more unachievable for the vast majority.”
See the review supplied to LandlordZONE by Nick Braun, founder Tax Café – publishers of leading specialist UK property tax guides – here
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