In 2016 it was announced by Philip Hammond that Tenant fees charged by letting agents are to be banned as soon as possible. Before this can take place, there also needs to be legislation brought to parliament, which means this isn’t likely to happen for another 12-18 months.
Along with Philip Hammond Autumn’s statement, there is also a section in The Office for Budget Responsibility report that states:
“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents.”
Over the last few years, there has been an increasing number of regulations and legislation governing private renting, and it is important that the role of qualified, well trained and regulated lettings agents is understood. Regulations for Letting agents have always been useful and helps with the best practice across the rental industry and introducing improvements for tenants should be introduced in a way that supports the growing professionalism of the industry.
There is the idea the widely held notion that tenant fees are money for old rope. But this is not the case. In the process of getting a set of tenants to the move in point, there is a lot that goes on from referencing the tenant, ensuring they have the right to rent in the UK and collecting the necessary documents to support this. Negotiating and preparing the tenancy for both parties, arranging and meeting the tenants for the check-in. It can be argued that these fees are presented in different ways by different agents (which is confusing), and some certainly do charge higher fees that are really over the top and I believe this is why we have ended up where we are today.
But what does the Tenant fee banning fee mean for East Dulwich Landlord and Tenants?
Four years ago (2012) Scotland implemented banning Letting Fees. This decision was influenced by the Charity Shelter who helped sway the Government to ban the fees back in 2012. There was then research undertaken in December 2013 that appeared to show that rents had not increased, and where they had, this could be explained by economic factors. However, you need to look at the trends not just one year after the ban.
Shelter were again quoting the research from December 2013 to say rents did not increase following the tenant fee ban in Q4 2012, but if you look at today’s figures, you will see Scotland’s rent have risen by 15.3% between Q4 2012 and today. (Source: CityLets Index). Which even outstrips London (see below).
Using the ONS (Office of National Statistics) for the English Regions between 2012 and 2016 you can see how Scotland compares to the English Regions. The figures do seem to point to the fact that rents have increased significantly since the ban on letting fees.
So let’s look at some of the figures if rents were to increase. How much would they need to increase by.
The current average rent in East Dulwich SE22 is £1635, whereas the average management fee per annum is £2354 at 10% (12% INCL VAT). I belong to a group of 500 letting agents, and on average we found a tenancy lasts about two years (although Government research states four years). We also found that on average couples were being charged £250 in tenancy fees.
This means a Landlord would have to raise rent approx. £12.50 per month to cover the cost, (excluding inflation) which is less than 1%. Overall this makes the average rent to rise to £1645. It remains to be seen how things pan out. If you would like any advice on the East Dulwich property market, drop it and have a coffee. We’re always ready for a chat about the property.