Autumn Statement 2016: Chancellor bans tenant fees

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  • Ban still in early stages with consultation due to begin in January 2017.
  • The proposal could lead to an increase in rents and a stretching of estate agents’ resources

In last week’s Autumn Statement, UK Chancellor Philip Hammond proposed to ban letting agents’ fees to tenants. The proposal is still in the early stages, with the consultation proposed for the New Year, and an Act of Parliament required to push the legislation through.

ARLA, the Association of Residential Lettings Agents, headed by MD David Cox, is deeply concerned by the proposed ban and feels that it has been rushed into with little regard for the facts or potential consequences. The ban would also undermine the work of the Affordability and Security Working Group, a government working group which aims to cap (rather than ban) fees and reduce costs for tenants.  David Cox explains: “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market. This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account.

What does the ban mean for tenants?

On the face of it, Philip Hammond’s proposal appears to be good news for tenants, who would be saved the cost of fees when beginning a new tenancy. Unfortunately, the fee ban looks likely to raise rents, as the costs of tenant services would still need to be met. The knock-on effect of this would be that tenants would find it even harder to save for deposits to buy their own homes, reducing their chances of getting on the property ladder.

How will the ban affect estate agents?

Most estate agents make no profit from tenants’ fees. The payment simply covers necessary pre-tenancy administration, including background checks. In addition, the Government has increased legislation surrounding residential lettings over the last year, meaning that the amount of paperwork has gone up and there are higher demands made on estate agents. If the ban on tenants’ fees is authorised, estate agents would still be expected to fulfil their legal obligations while receiving less money to carry them out.

Next steps

ARLA is making every effort to meet with Chancellor Philip Hammond and Housing Minister Gavin Barwell as soon as possible. David Cox intends to educate both ministers about the wider implications of the proposed ban on letting agents’ fees to tenants and what it will mean for the cost of renting.

The consultation is expected to begin in January 2017. David Cox says, “When the consultation is launched, the industry must present a united voice and all agents need to work with ARLA to make our collective views heard at the very highest levels of government.

We look forward to working with ARLA to ensure the best possible outcomes both for tenants and for the lettings industry as a whole.

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