Are Letting Agents’ Administration Fees Justifiable?

Are Letting Agents’ Administration Fees Justifiable?

After last week’s motion by Labour in the Commons to ban fees to tenants was defeated, this month’s VP blog considers whether letting agents can actually justify the fees they charge tenants.

In recent weeks, several industry leaders have been forthright in raising their concerns with the proposed ban, with many pointing out that a ban on fees would simply lead to increased fees for landlords who would then be forced to increase rents so as not to be left out of pocket.

But is this a good enough reason for not banning fees? There has been a lot written in favour of agents charging tenants fees, but very few agents seem willing to come out and fully justify their fees or provide detailed breakdowns of these charges for prospective tenants – which some might say speaks volumes about whether they can actually justify these charges.

Ian Potter, Managing Director of ARLA, said recently that “fees are not arbitrary or unnecessary; they represent a business cost that Labour has failed to recognise” and it is difficult to argue against this. It is true that when a letting agent is setting up a new tenancy there are associated ‘business costs’: inventories to produce, references to procure, guarantors to contact, deposits to protect, credit to check etc. However, if an agency is openly charging a tenant for these services, what services is the landlord paying them for? How can agents justify charging landlords and tenants for the same service?

The two keys words in this debate appear to be ‘justification’ and ‘transparency’ and the Government clearly agrees, having recently announced that it would be bringing forward its own amendment to the Consumer Rights Bill which will compel letting agents to publish a full tariff of all their fees – both on their websites and in their offices. Housing minister Kris Hopkins claims that, ‘ensuring full transparency and banning hidden fees is the best approach’ and that ‘short-term gimmicks like trying to ban any fee to tenants means higher rents by the back door.’

However, with the rental market more competitive than ever for prospective tenants, would this transparency actually put tenants in a stronger position, financially or otherwise? Stella Creasy, Labour’s shadow minister for competition and consumer affairs thinks not, describing transparency as “like someone being tied to the train tracks and being read the train timetable.” She has a point. Transparency and justification of fees is all very well and good but if all agents charge an extortionate amount in fees what choice do tenants have but to accept them?

This debate is set to rumble on through this year and into the next, with news that agents might have little more than 12 months before they face the same possibility of a ban on fees – speaking following the recent debate, Clive Betts, chairman of the CLG committee, said that “further evidence” would be examined by the autumn.

V1sion Properties has committed to providing a ‘tenant-friendly’ service which includes no agents’, administration or referencing fees for tenants and there are no plans to change this now or in the future, whatever the outcome of the next debate on this issue.