The proposal to ban letting agents from levying charges on tenants is expected to force landlords to increase rents. This is not surprising as landlords cannot be expected to absorb these costs along with tax changes, licensing regulations and stamp duty on second homes all affecting their business at the same time. However, this is not the only problem with the proposal. The Department for Housing, Communities and Local Government Select Committee talked for two hours on the draft bill, which including quizzing three experts about what they could expect if the bill is passed.
On top of the likelihood of increased rents, the ban on agency fees could also see local authorities imposing hefty fines on letting agencies and landlords as a way of enforcing the regulations. This is claimed to be the case if government support or finance is not forthcoming. A further criticism aired during the discussion is that letting agents could be less motivated to run landlords’ properties as professionally as possible because their fees will be lower.
Further negative viewpoints also highlighted flaws in the proposed bill. These including a debate about whether it was watertight from a legal point of view and whether local authorities would actually have the finances and other resources to implement it. The experts seemed to fear they would not. They also debated whether the new housing tribunal would be effective and the fact that landlords could face hefty fines of up to £30,000 if they break this new law. The committee also discussed how letting agents should be fined should they flout the new law. They wondered whether to base it on the additional fees that were levied illegally on the property or whether it should take into consideration the entire portfolio held by the agent. On top of all this, they also debated whether the bill could actually drive down the quality of properties in the rental sector as landlords find ways to save money. So tenants will be paying more for poorer quality at a time when good rental properties are in short supply.
The Tenants’ Fee draft bill is now due to go to report stage and then for a third reading. A petition has been set up which aims to encourage people to pressure the government to rethink the bill. The link to the Petition.