7.26.2018

Can Tenant Fees affect Landlords, and should they even care?

Why Landlords should be just as pissed off about Agents fees as Tenants


 It is well known that letting Agents fees are the bane of anyone who rents, tenants in England are currently paying an average of £404 every time they move on fees that don’t give them any return on investment. There are even additional charges for tenants on low incomes and needing rent guarantors (at an average cost £152), or things as simple as moving in on a weekend with comes with an extra £62 charge. These controversial fees are bad for tenants but are they good for landlords?

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For a start Agents fees sets the relationship off to a bad start because lets face it most Letting Agents fees to tenants are little short of a scam. I recently went to view a rental property that the Agent wanted to charge over a grands worth of none refundable fees for when asked why they were priced like that when our current landlords where simply charging £55 total for tenant referencing the response was a shrug and ‘you get what you pay for’. Our current landlord has been a superstar and this Agent couldn’t even give an explanation for what we would be getting for +£1000, needless to say even if it had been the dream house I wouldn’t want to ever deal with a Letting Agency like that again. That Landlord is now sitting on a property that's tenants are leaving and no tenant lined up because the Letting agency will make more money waiting for a tenant who will bow to their ridiculous fees than getting tenants in quickly to keep the landlords' income coming in.

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Another way that those fees create problems for the landlord is that it disincentivizes tenants staying long term. Tenants are more willing to move if they are going to be charged a fee to update tenancy arrangements, something that takes no time at all from the Agents side and frankly should be part of the ongoing commision they take from letting the property. Again it’s in the Agents best interest that tenants are constantly changing so they can charge introductory fees, which means the landlord is at more risk of getting lumbered with nightmare tenants and at higher risk of having months without tenants.  This is another reason Letting agencies often have blanket bans on pets, without discussing this clause with the landlords, statistics show that tenants are often happier and likely to stay significantly longer in a tenancy if they are allowed pets. It is financially better for landlords to allow pets but Letting agencies will often deny this even though pets damage is often far cheaper to fix than damage caused by tenants with children. A long-term, good tenant is the ultimate goal for a landlord, so it is in your best interests to keep your tenants happy, but this is not the goal of the people you spend 15% of your takings on which is madness.

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Fees could soon be an illegal practice as it already is in Scotland, a bill which aims to ban fees in England was drafted by the government in 2017, which would see the government banning letting Agent fees paid by tenants, and also sets a cap on tenancy deposits at a maximum of six weeks’ rent. Though the government has revealed it doesn’t expect the ban to come into force until “after spring 2019” and has no official timetable for when this will actually come into play. Without pointing fingers, this slow change isn’t really surprising when you consider the number of politicians who have invested into property. It is currently illegal to charge tenants anything that the landlord has already been charged for, but as Letting Agents keep the landlords' details private from the tenants there is no transparency if Agents are actually acting within the law. Letting Agents are being paid by both parties, meaning they cannot act as representation for either party in a court of law making them effectively useless. These fees are not in the tenants or the landlord's best interest so both parties should be doing more to see that they are abolished. The Residential Landlords Association said there were many positives in the plans to stop Tenants fee, and welcomed the cap on deposits being set at six weeks but have warned that the Letting Agents may just pass these fees onto landlords in turn leading to higher rents.

Though from a Tenants perspective this small rise in rent will almost certainly end up costing them less than the current wild west approach of Letting Agents squeezing them for every fee they can think of “research commissioned by ARLA Propertymark carried out by Capital Economics demonstrated that if a full ban comes into force, two tenants will end up paying an extra £206 per year in rent” which would equate to an extra £17.17 pcm. For anyone who has to rent privately and move often, £17.17 a month is far easier to find than an additional £400 - £1000 in letting Agent fees at the time of moving. As deposits are not returned until at least two to four weeks after you vacate a property and you cannot be 100% sure you will get your deposit back at all thanks to unscrupulous Letting Agents. You’re expected to come up with a months rent upfront, a deposit and fees, on top of all the costs associated with moving a £17.17 increase seems a small price to pay.


Finally and probably most importantly they are ripping off landlords! There are real problems for many landlords with the way Letting Agents are legally allowed to behave as there is no standard service level agreement between landlords and Letting Agent meaning costs and level of service will vary wildly from Letting Agent to Letting Agent. In addition to this Letting Agents are currently able to set up with no training or qualifications, meaning that they can basically do what they like out ignorance, they not experts they are vultures. The Government has announced that they intend to introduce an independent regulator for all Letting and Managing Agents but this is not going to happen quickly or easily. Landlords particularly those new to letting property are more often than not unaware of these fundamental flaws with the way Letting Agents are allowed to operate, and will often inadvertently end up paying way more than they need for letting their property. Currently, there is an oversupply of some rental accommodation leading to voids in tenants, a landlord that uses a letting Agent could find that they are paying a Letting Agent with a large number of similar properties on their books. The Letting Agent won’t tell landlords this because they have nothing to lose by having another client and more choice to attract tenants who are the real cash cows. The landlord, on the other hand, would be far better advertising their property separately where they can control the marketing, build a relationship with their tenant and overall have a much greater degree of control over their investment.




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