New Bill would fail Tenants and lead to rent increases

A new Bill has been introduced in Parliament, which is seeking to abolish letting agents’ fees charged to tenants. The Renters Rights Bill had an unopposed second reading in the House of Lords recently. 

One of the aims of The Bill is to amend the Landlord and Tenant Act 1985 by stopping letting agents from charging tenants or prospective tenants set up fees, inventory check-in/out fees; credit checking fees or renewal fees.

Well intended as this may be, the reality is that these costs won’t go away so landlords will have to bear the brunt of these costs initially and are likely to pass them on to tenants through higher monthly rental amounts. There is a wide range of fees being charged by agents and we recognise that the intent behind the Bill is to make letting easier for applicants by lowering the initial costs involved. With the tenant set up fee for example, at McCarthy Holden we charge tenants £390 including vat per property which includes not only credit checking of tenants but the associated paperwork and tenancy agreement. Having looked at other letting agency websites this is extremely competitive when some other agents are charging significantly more.

The tenant set up fee is contributing to the costs of a vitally important job which has to be undertaken before a tenancy is finally agreed and entered into. It covers referencing tenants (identity, immigration and visa confirmation,  financial credit checks, obtaining references from current or previous employers/landlords and any other relevant information to assess affordability) as well as contract negotiation (amending and agreeing terms) and arranging the tenancy and agreement.

The new Private Member’s Bill would apply in England only and has been introduced by Baroness Grender, a former director of communications for Shelter. It appears that at the heart of her argument is the belief that Letting agents should not be able to get away with double charging fees – imposing them on both tenants and landlords – when in fact it is only the landlord that is the client and therefore the one that should be paying. There is, of course, some logic in this view, however, don’t be misled in to believing it will reduce costs for tenants, because if the logic is followed and the landlord has to shoulder the pre-tenancy costs then you can be sure of one thing and that is the landlord will pass these cost on to the tenant by way of the rental level.

We believe a recent counter view  was taken by Government spokesman Viscount Younger of Leckie who said: “The Government is clear that the vast majority of letting agents do provide a good service to tenants and landlords and that most fees charged do reflect genuine business costs.” (Source Eye).

McCarthy Holden lettings director Nicola Bremner believes that it is imperative a balance is reached between reasonable charges for the work carried out by Letting Agents. ‘it is not just a matter of printing out a tenancy agreement and allowing people to move into a property, with an ever-increasing amount of legislation that must be adhered to, the service provided by your letting agent is increasingly important to ensure both landlords and tenants are aware of their obligations.”

If you are a landlord or tenant and need professional insight into the residential lettings market legislation then contact our experienced lettings agent team.

House prices to fall and don’t forget WW3!

There might be a hint of misplaced pessimism and something slightly odd about Chancellor of the Exchequer  George Osborne’s  announcement that house prices will fall by up to 18% on a Brexit, given that his help to buy scheme pushed prices up, then stamp duty changes in 2014 pushed high-end house prices back down and more recently the buy to let March stamp duty changes have just triggered another blip in the market which in itself could impact on prices in the sub £300,000 sector. 

He appears to love the prospect of a decline in house prices and you would be forgiven for assuming he is one of the most left-wing Chancellors imaginable, yet nothing is being done to tackle the real problem of creating enough supply of house builds to satisfy the need for property to buy or rent.

Looking back over the years when a truly sizeable drop off in house prices has occurred, it has in all cases been to do with significant events on a global scale, from the 1974 old crisis with three-day working week in the UK through to more recently in 2008 with the worldwide banking crisis. I am not sure a Brexit will be in the same league and indeed in a recent poll of real live buyers on McCarthy Holden’s books 88% of buyers said the EU referendum outcome would make no difference to their buying plans. They need to move and there is not enough house stock choice or availability.

So will house price drop by 18% on a Brexit?

They could, but they could also go up and then, of course, there is the world war three that George and David think could also happen and in those circumstances, property prices would be the least of our worries.

John Holden

P.S. Just a bit of fun about the use of fear, overall impressed with George Osborne’s management of the wider economy but yet to be convinced about his house price predictions.