There Is No Free Lunch
This month I shall be the lone voice railing against the recently released consultation on banning letting agent fees paid by tenants. A letting agent professional opposed to a cut in fees? No shock there but I hope to be the voice of reason rather than a carping vested interest.
There is no doubt this is a hugely populist move by Government. Social media is awash with gleeful tenants looking forward to no agency fees. No surprise since estate agents regularly feature in polls of the least liked professions. But in the face of this overwhelming joy there has been little attempt to justify letting fees from our side of the fence.
A major gripe is the so called ‘double billing’ practice where agents charge both tenant and landlord. Leaving aside the fact that this is common business practice in other sectors as well as supermarkets who charge for the goods then levy a fee from manufacturers for prominent placement, these are two different fees.
The tenant is charged because we need to present the landlord with a vetted tenant who has adequate references, is able to afford the rent and who does not pose a significant risk. Aside from the time this process takes we must train all staffs in compliance including assuring ourselves the tenant has the right to reside in the UK.
The landlord fee is charged because we have a responsibility to protect our landlords interest under law and to protect the property. This is cost share not ‘double billing’. These costs will still be incurred if letting fees are banned.
In preparing this consultation Government surveyed fifty estate agents. A minute sample of the estimated 26,000 agents in the UK but their findings indicate agency fees of between £120 and £750. Guess where they are charging £750? It certainly is not Heaton or anywhere outside the overheated M25 bubble but it makes a nice headline. Anything you buy in Knightsbridge will reflect the eye watering rent, rates and overheads necessary to operate in that Borough. The reality for the rest of the UK is very different.
Finally, I would suggest we have adequate consumer protection with existing legislation. Legislation demands that we must advertise our letting fee and we do. But this legislation is not enforced so the small minority of rogue agents can ignore it with impunity.
The general consensus among tenants is, this is fantastic news. As if our business overheads are going to vanish overnight. Clearly, they are not and there is only one way in which these overheads can be recouped and that is through increased rent. Legislation to encourage fluidity in the market will in fact, hit the very people the legislation purports to protect – the tenant.
So, in the face of almost universal joy at the prospect of abolishing letting agent fees I would quote American Congresswoman Grace Napolitano who said “We must explain the truth: There is no free lunch”.