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Letting agent fees are going to be banned under new rules announced in the Autumn Statement. Letting agency fees to tenants have already been banned in Scotland, while in England and Wales the agents have had to publicise their fees so there is transparency. Fees can vary enormously, with some tenants paying as much as £700 or even more in fees for administration services or credit checks, on top of paying a month’s rent in advance and a month’s rent as a deposit. An English Housing Survey shows fees cost an average of £223, but Shelter research four years ago showed one in seven tenants paid more than £500. The Shelter research also showed that when renters used a letting agency, they paid upfront costs of more than £1,000 and more than £2,000 in London.

The chancellor, Philip Hammond, argues that shifting the costs on to landlords will save hundreds of pounds for the 4.3 million households in rental accommodation. The argument is that the move could be good for competition, because landlords are able to shop around to find the cheapest agents. The ban is set to be brought in ‘as soon as possible’ following consultation, with Mr Hammond saying that landlords appoint the letting agents and so should cover their fees.

Until now, letting agents could charge tenants and landlords for different administrative services like checking references, drawing up tenancy agreements or renewing a tenancy. Now agencies will either need to absorb some of the costs and reduce their profits or pass the charges on to landlords. However, landlords argue that these extra costs will be passed on to the tenants in increased rents.

The latest move comes at a time when landlords are already being forced to put up rents to cover cuts in mortgage interest tax relief. The so-called tenant tax will restrict mortgage interest expense deductions for private landlords, which will see many landlords paying extra tax of 20 per cent or more on their annual mortgage interest and other costs. Many fear the changes will mean they cannot make a profit and so have the choice of selling up, moving out of the buy-to-let market or increasing rents to make their business viable. Another alternative is for landlords to bypass letting agencies and do the work themselves, or looking at the cheaper, online letting companies. Landlords with larger portfolios could invest in software to help with the administrative duties such as contracts, inventories, check-ins and check-outs.

However, professionals in the rental sector argue that stronger consumer protection rather than a ban is a better option. Association of Residential Letting Agents managing director, David Cox, says the ban will have a negative impact on the market. He asserts that most letting agents do not profit from fees and the decision will not help tenants in the longer-term. This can be backed up by figures on the day of the Autumn Statement, showing agents having some of the biggest falls in company share prices, with Foxtons down 10.6 per cent to 110p per share and Countrywide seeing a drop of 5.5 per cent.