Landlords rather than tenants are to be liable for the costs of letting a property.
In his first Autumn Statement under May's government, Philip Hammond said, "We’ve seen these fees spiral despite attempts to regulate them." He went on to say that, "Landlords appoint letting agents and landlords should meet their fees."
Shelter's Chief Executive, Campbell Robb, said, "Our recent survey found that nearly half of renters had been asked to pay fees that they thought were too high, with many having to borrow money every time they move, so this will make a huge difference to all those scraping by in our expensive, unstable renting market."
This has caused a bit of stir for various reasons and the debate will continue long after the legislation is implemented, but what are the implications of this for tenants?
For a long time, tenants have been blatantly ripped off by letting agents charging them astronomical fees for what amounts to very little in return. I've seen some letting agents charge tenants up to £300 for a reference - which can be obtained from a credit referencing agency from as little as £9. That's only a 3,233% markup.
On top of that, there could be a tenancy agreement fee - the tenant's share of drawing up the tenancy agreement. Again, this could quite comfortably be a couple of hundred pounds for what amounts to no more than ten minutes of data entry. That's it - all the letting agent does is type in the name of the landlord, tenant, property address, tenancy start and end dates, rent and security deposit amounts and any special clauses (which will be minimal as many letting agents don't allow changes for the simple reason that they do not understand the legislation), then a click of the mouse and the tenancy agreement template is populated by whatever system they are using. Essentially, an administrator is charging a lawyer's hourly rate for ten minutes' work.
So the good news is that prospective tenants are going to be much better off and won't have to fork out hundreds of pounds just for the privilege of putting a roof over their head.
Of course, letting agents aren't going to take this lying down. We all know that any income they lose from the tenants will just be added onto the landlord's bill. Which, I suppose, is fair enough. However, nobody likes being hit in the pocket so it is likely that the landlords also will not take this lying down and accordingly push up their rent to cushion the impact of any fee increase from the agent.
This doesn't half negate what Philip Hammond is trying to achieve, doesn't it? In effect, the tenant is no better off, so what is the point of it all? Well, I suppose there is some benefit to it in that prospective tenants will not have to find a small fortune to hand over to the letting agent before they even think about paying a security deposit and any rent. For an apartment with a rent of £1,000 PCM, you will probably need to pay a security deposit of £1,385, making a total of £2,385 up front. Add to that agency fees of say, £600, and you need to pay up front £2,985. Not a lot if you're working in London, perhaps, but what about the rest of the country?
Wouldn't you rather spread that £600 over the duration of the tenancy and pay £1,025 each month in rent? This assumes a 24-month tenancy. For many, this method will be a more comfortable solution.
I end on the "ugly" note, but it is only ugly for Foxtons and its shareholders, and not me. No, I am actually smiling because I have had the displeasure of working with various Foxtons agents over the years and if there is an agent more deserving of a booby prize this is the one. The disregard for both their clients (landlords) and customer (tenants) is palpable as they are trampled over in a voracious pursuit of money. So read this with pleasure, whilst it lasts:
Shares in Foxtons are reported to have fallen following the announcement - 13 percent in early trading on Wednesday before a slight recovery to 10 percent this morning.