Over Regulation Hits UK Tenants

Thursday October 24, 2013

What would happen if Government decided to regulate a tin of beans? To put the burden on manufacturers to ensure Fair Trade ingredients, the product of ethical labour, that the tin and label were made from sustainable sources. Whatever the effect upon the beans, one outcome is certain. The price of beans would rise.

A ridiculous scenario? Perhaps. But this is precisely what is happening in the UK residential lettings sector as a raft of Government proposals intended to protect the tenant create an administrative burden which passes costs to the very tenant they set out to protect.

British housing charity Shelter is lobbying to abolish all tenant fees in England, something they have succeeded in doing throughout Scotland. This has resulted in lettings agencies raising their fees to landlords who naturally, put up rents to maintain their margins. The tenant is no better off. Everyone accepts that a house sale will incur stamp duty, legal fees and mortgage fees yet Shelter seem to believe that lettings agencies should follow their lead and register as a charity.

Then there is the increasing pressure for lettings agencies to act as a police force. The Immigration Bill, expected to become UK law in early 2014 will force private lettings agencies to quiz tenants about their immigration status and restrict access to bank accounts for people in the country without permission. Letting agents, who are already responsible for checking tenant references, will bear the brunt of fines up to £3,000 where they have been retained by landlords and have failed to carry out proper checks. These proper checks require intensive staff training and place a further administrative cost on landlords resulting in, once again, higher rents.

Deposit laws designed to protect tenants have meant a huge increase in administrative work for lettings agencies and there is widespread uncertainty about the implications. Some commentators predict a swathe of law suits as tenants seek redress against landlords, even if the landlord has acted within the spirit of the law. ‘No Win No Fee’ law firms are watching with interest. Lettings agencies and their landlords are seeking legal advice, which is never cheap particularly when the law is open to interpretation. This additional cost will inevitably find its way to the tenant.

Letting agencies are required by Her Majesties Revenue and Customs (HMRC) to calculate and deduct tax from rents of landlords who live abroad then forward this revenue to the treasury along with quarterly reports on overseas landlords. Once again the end result is additional cost and the tenant is the loser.

There is no doubt that the UK lettings agency sector needs regulation to weed out the few unscrupulous agents who take advantage of tenants. But self regulation is already in place through such bodies as ARLA, the Association of Residential Letting Agents. As members of ARLA, we agree to adhere to a strict, twenty page code of conduct covering every aspect of the lettings business with an effective complaints procedure.

Reputable letting agencies who subscribe to this code realise that ethical behaviour and transparency are essential for the protection of landlords, tenants and the agents themselves. Deposit and fees are indicated on all advertisements, literature and websites. Since this code of conduct is already in place and covers all the perceived failings in the lettings agency sector, why reinvent the wheel with an additional burden of expensive red tape? Surely making the code of conduct mandatory for all UK lettings agencies would be a simpler and less expensive solution?

The tenant is arguably the most important link in the letting agency – landlord – tenant chain. The tenant is our customer who deserves adequate protection under law and a fair deal. The fear among reputable lettings agencies is that far from offering a fairer deal, the current raft of legislative red tape will have the opposite effect by placing an additional financial burden on the very people it is designed to protect – the tenant.