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MPs wary of unintended consequences of letting agent fees ban

The majority of MPs speaking at a House of Commons debate yesterday acknowledged they are wary of the ‘unintended consequences’ of a blanket ban on letting agent fees.

Several MPs referred to the potential implications for small businesses and low income or non-UK tenants, as well as the prospect of rising rents and job losses.

The debate – which was sponsored by Hunters co-founder and MP for Thirsk and Malton, Kevin Hollinrake – was also attended by housing minister Alok Sharma.

Sharma confirmed that the government’s response to the official consultation on the letting agent fees ban will be published ‘very shortly’.

Hollinrake opened the debate with a lengthy speech, outlining some of the benefits and potential consequences of a ban on letting agent fees.

He noted that since letting agent fees were banned in Scotland in 2012, the number of agents north of the border has stayed largely the same.

The MP said that a letting agent fees ban provides a ‘challenge’ but also an ‘opportunity’ for agents and in Scotland those ‘willing to work harder’ have prospered.

Hollinrake then went on to discuss the potential unintended consequences of a ban on letting agent fees in England.

He explained that tenants on low incomes may be effected if agents choose only to reference prospective tenants who are a ‘safe bet’ due to having to shoulder the costs themselves.

When asked about the level of substandard rental accommodation across the country, Hollinrake quoted figures which suggest that one million of four million private rental homes are considered as substandard.

He said that substandard accommodation should not be a characterisation of the property industry and landlords and letting agents in particular.

Hollinrake then discussed the proposed cap on holding and security deposits. He said that a cap of one month’s rent on security deposits could represent ‘too short’ a time period.

He said this is because many tenants see their deposit as their last month’s rent, while a high proportion of tenancies have damage issues at the end of the contract. He said that a one month’s rent deposit cap could therefore see landlords left out of pocket.

The Hunters chairman then tackled the issue of enforcement. “We need proper enforcement to ensure a level playing field for all companies,” he said.

He explained that England is currently the only part of the UK without a central register of landlords and raised the suggestion of extending the redress schemes to cover landlords as well as agents.

According to Hollinrake, the redress schemes have worked well to drive up standards among agents. He said that a national rental standard, backed by a lead enforcement agency could be successful.

The floor was then given to MPs to raise their viewpoints on a range of issues.

Charles Walker, MP for Broxbourne, discussed the importance of inventories being carried out independently.

He said that it’s reasonable that landlords should fund inventories and that there is always likely to be ‘self-interest’ from those who carry out the check-in and check-out process themselves.

Walker also said he has organised a meeting with mydeposits chief executive Eddie Hooker to discuss the issue of self-let landlords insuring deposits paid by tenants.

The MP for North West Norfolk, Henry Bellingham, said he had received no complaints from tenants about letting agent fees. In Bellingham’s constituency, he said the average application fee is £325 and the average renewal fee is £75.

Throughout the debate, several MPs agreed with many of Kevin Hollinrake’s points and referenced his considerable experience of the lettings industry.

Housing minister Alok Sharma was then invited to speak. He described the debate as ‘good and balanced’.

As well as confirming that the government’s response to the fees ban consultation would be published ‘very shortly’, Sharma acknowledged that the ‘broken’ housing market remains one of ‘the greatest barriers to progress in Britain’.

On the specific subject of fees, the housing minister explained that he felt capping fees would be largely ineffective as it would be ‘harder to understand and enforce’.

He said that a blanket ban on fees, on the other hand, will be ‘easy for tenants to understand and enforce themselves’.

Sharma added that his team is currently working with industry stakeholders to create a ‘How to Let’ guide for landlords to complement the existing ‘How to Rent’ guide for tenants.

Commenting after the debate, David Cox, chief executive of ARLA Propertymark, said: “We welcome this morning’s comments from Kevin Hollinrake MP around the unintended consequences of a total ban on letting agent fees.”

“It’s important that the government understands the value of the services agents carry out for both landlords and tenants when shaping its final legislation.”

“We are therefore disappointed in Alok Sharma’s comments today declaring that the government’s position remains that all fees will form part of the ban.”

“As Kevin acknowledges, the ban on fees for referencing checks will cause problems. Agents are required to carry out these checks by law, and they invest both time and resources to ensure this work is carried out properly.”

“The government must now consider exempting referencing checks from the ban as well,” he concluded.

Isobel Thomson, chief executive of the National Approved Letting Scheme (NALS), added: “[We] welcomed the cross-party debate on the fee ban and confirmation that the minister has adopted a common sense approach on holding deposits with his announcement that they will be exempt from the ban but he gave no clear indication of when legislation might come forward.”

“We were encouraged that MPs quite rightly expressed concern about the implications of rent increases as a result of the ban and the impact on those least likely to afford them.”

“Of real interest was the Minister’s commitment to consider the ban on tenant fees in the context of wider work in the private rented sector, something NALS called for earlier this year.”

“This is positive news and an indication that he has listened to the call for an end to piecemeal legislation. His clear reference to regulation was welcome as well as his willingness to explore options for what a regulatory framework might look like.”

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