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Letting agents are not only bound by housing legislation, such as The Housing Act and the Landlord and Tenant Act, but also other offshoots of legislation that touch upon homes let within the private rented sector. This means that agents working within the industry need to have comprehensive knowledge and a thorough understanding of around 150 pieces of separate legislation.

Unlike estate agents who are regulated as an industry by the Estate Agents Act, letting agents effectively act as legal counsel, and they must always remember that although they may act for a landlord they have a responsibility to provide Duty of Care to tenants. Unusually, this places accountability on the letting agent for all parties to a contract.

For a number of years, ARLA Propertymark, the industry regulatory body for letting agents, has been calling on the Government to provide proper and effective industry regulation, without successive governments introducing piecemeal legislation which just frustrates agents who are struggling to keep up with frequently changing laws.

The hot topic in the media at present is fees charged to tenants by agents when applying to rent a property. Most people will agree that excessive administration fees are unfair and unjust and to combat this, the Government is proposing the Draft Tenants Fees Bill, which is currently being passed through Parliament.  The passing of this legislation will likely impose a blanket ban on all tenant fees in the private rented sector.

Whilst there may be a chorus of cheering throughout ‘Generation Rent’ it may be worth considering the impact this ban could have on the end user i.e. the tenant.

Agents will still have a bottom line that they need to cover. There are agents in the industry who charge excessive fees for very little work, however there are also professional, fair and honest agents who have to cover their expenses for managing the application process on behalf of the landlord.

Fees charged for referencing is a good example of this. Fees are charged to the agent by specialist companies that undertake referencing and this cost is most often passed on to the tenant with a small administration fee attached.  The agent is unlikely to have made any profit given they must pay a fee to the referencing company and pay the salary of the person who processes the application.  This is often laborious and time consuming but it is necessary to protect the landlord’s interests.

It is worthy to note that fees charged by agents represent on average, 18-20% of the overall income of an agent. If tenant fees are banned, the likelihood is that agents will need to recoup their costs somehow.  This can result in agents charging higher fees to their client, the landlord, and the subsequent outcome of this will be landlords charging higher rents.  The circle is then completed by the end user, the tenant, paying a higher rent.

The Government also needs to consider other situations, such as when a tenant makes a request to leave the property early, by breaking their contract, a legally binding document signed in good faith by all parties, without provision to do so. Why should the landlord suffer from a void period of rent and re-marketing when there is no fault on their part?  Usually a fee would be charged to a tenant to cover these costs, however under the ban, this too would be unlawful.

The Government must look at the industry as a whole in a coherent and strategic fashion and consider all possible circumstances, including where lawful tenant fees could be reasonable to avoid frustrating the entire point of the proposed legislation.


Notes to editor

If you would like to get in touch with Kelly, please contact her:

kelly.smith@allsop.co.uk or +44 (0)20 7344 2622