A clear ban on letting agent fees is the only way to fix an unfair market
14 Feb 2017
The housing white paper reaffirmed the government’s commitment to ban unfair letting agency fees charged to tenants. This will be welcome reassurance to any tenant nervous about the lack of action since the chancellor promised the ban in November last year.
Department for Communities and Local Government (DCLG) officials are currently preparing a consultation on exactly how the ban will work, which the white paper confirmed would be launched early this year.
How the ban is framed will be crucial for determining whether it actually works and brings much needed fairness and savings for renters – or creates loopholes for agents to exploit.
While sensible agents will act to get ahead of the ban, we expect many to attempt to lobby for it to be watered down, drawing obtuse distinctions between unfair fees and nebulous “charges”. From behind the scenes activity, we know some seem stuck in denial and are persisting in their defence of rip-off fees to tenants.
The experience of Scotland shows why the government will set itself up to fail if it goes for anything other than a clear cut ban on all upfront fees to set up or renew a tenancy.
Scotland is sometimes mistakenly described as having “banned” letting agent fees to tenants in 2012. In fact, so-called “premiums” had been illegal since 1984. But the law was widely flouted, with agents charging for things like reference checks, inventory fees and check-in costs. Following a Shelter Scotland campaign, the Scottish Government was forced to clarify the law in 2012, setting out that all such up-front charges to tenants were illegal.
Even with the clarification and resultant publicity, awareness and compliance in Scotland is still less than perfect – allowing a minority of agents to continue to rip off tenants.
Research commissioned for Shelter in 2014 estimated that about 10% of the market was still not complying with the ban and colleagues in Shelter Scotland continue to report problems with agents openly flouting the ban or exploiting grey areas.
This seems to be attributable to a lack of consequences for rogue agents: only 18% of letting agent managers surveyed thought enforcement was robust enough. But poor awareness also likely played a part: only a third of renters in Scotland clearly understood there was a ban on fees – despite the high profile campaigning by Shelter Scotland and the government’s clarification.
Given that even the unequivocal ban in Scotland has been met with compliance problems, we would expect any attempt to carve out exemptions in England to make a ban here positively meaningless. Compliance will hinge on renters knowing their rights and feeling confident in challenging rogue agents. It will be incredibly hard for them to do so if some fees and changes are left out of scope by the legislation.
Picture a tenant desperate to secure a flat and attempting to negotiate with an agent who insists that they are a professional and their particular fees are legitimate. If the government really wants to fulfil its pledge to ban unfair fees, then it must do so in black and white and not legislate for harmful grey areas.