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How might the letting fees ban really impact tenants?

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By banning tenants from paying letting agents’ fees, the government aims to improve transparency and affordability for renters. This ban should make it more affordable for tenants to move rental properties, and easier for them to save a deposit to buy a property of their own. 

letting fees ban really impact tenantsHowever, when the proposed ban was first announced by Chancellor Philip Hammond in last November’s Autumn Statement, some voices in the property industry said it would simply lead to rent hikes for tenants, especially as many landlords are already struggling to maintain their profits in the wake of multiple changes to the buy-to-let sector.

But how might the letting fees ban really impact tenants when it is finally implemented? On the face of it, tenants should save money, especially in the short-term. When the ban takes effect, tenants will no longer have to pay administrative fees, instead only paying the refundable deposit and the rent. This should make it easier for tenants to budget for moving, manage their costs, and move to another rental property.

However, if a full letting fees ban is implemented, this could lead to rent increases for tenants as landlords look to hold onto their profits in the wake of multiple stamp duty and tax changes affecting buy-to-let investors. If more landlords bow out of the market in response to all the changes being introduced, this will mean fewer rental properties on the market and less choice for tenants, potentially leading to rent rises.

The ban should help to force out less scrupulous letting agents, and make costs more transparent for tenants, which should, in turn, make the process of renting easier and more straightforward for tenants.

What about landlords?

If a complete ban is imposed, letting agents may increase the fees they charge to landlords to cover their administrative costs. However, landlords are free to shop around, compare fees from different letting agents, and go with the agent they choose. This may bring down letting agents’ fees across the board, making it more competitive.

Landlords have been hit by a series of government measures in the last few years, all designed to slow investor activity in the buy-to-let market. This includes the extra 3% stamp duty surcharge and the changes to mortgage interest tax relief, the latter of which are being phased in from April 2017. The ban is just the latest in a line of changes affecting landlords, and it may contribute to some landlords putting up their rents.

When might the ban be implemented?

We can’t say for certain, but the ban will likely not take effect for another 12-18 months. The government has released the consultation paper, which gives the public time to respond with their views before the consultation period ends on 2 June 2017. A ban may not therefore be introduced until late 2018.

Landlords, tenants, and indeed letting agents, won’t know what the ban might really mean until after it has been implemented. In the meantime, if you need more information or are a landlord wanting to find out more about our rent guarantee scheme, get in touch today.

Neil Jennings

Neil is the Operations Director at Assetgrove Lettings, London's Leading Rent Guarantee Company, providing Landlords with no voids, property maintenance, fee-free property management and stress-free service.

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