Yesterday saw the proposal to issue a blanket ban on letting agent fees debated in the House of Commons.
During these discussions, the majority of MPs said that they were concerned about the ‘unintended consequences’ that the possible ban could bring.
A number of MPs referred to the potential implications that the ban could have on small business and low income or non-UK tenants. In addition, the potential prospect of rising rents and job losses was raised.
The debate on fees was sponsored by MP for Thirsk and Malton, Kevin Hollinrake and was also attended by Housing Minister Alok Sharma. Following the meeting, Mr Sharma confirmed that the Government’s response to the official consultation on the fees ban will be published shortly.
During the debate, Mr Hollinrake noted that since fees were banned in Scotland in 2012, the number of agents north of the border has stayed fairly consistent. In addition, those in Scotland were found to be facing a challenge but agents were also given an opportunity.
For England, Hollinrake was quick to discuss the potential unintended consequences that any ban could bring. He explained that tenants on low income could be impacted, if agents choose to only reference prospective tenants who are a ‘safe bet’ due to taking on these costs themselves.
When quizzed about the level of substandard accommodation in the country, Mr Hoillinrake quoted figures that indicate one in four private rental homes are in a substandard condition. He noted that these types of accommodation however should not be a consideration of the property industry in general, nor of landlords and letting agents.
In terms of deposits, Hollinrake observed that a cap of one month’s rent on security deposits could represent ‘too short’ a time period. This, Hollinrake observes, is due to many tenants seeing their deposit as their last month’s rent, while a large proportion of tenancies have damage issues at the end of the contract. Therefore, a cap of a month’s rent could see therefore see landlords left out of pocket.
The conversation then turned to the issue of enforcement, should any ban come into force. Hollinrake observed that: ‘We need proper enforcement to ensure a level playing field for all companies,’ before acknowledging that England is the only country in the UK without a central register of landlords. He did though note that the redress schemes have done a good job of driving up standards amongst agents.
Assessing the debate, Mr Sharma said it was ‘good and balanced.’ Addressing the issue of fees, the Housing Minister said he felt capping fees would be largely ineffective as it would be ‘harder to understand and enforce.’
On the other hand, he said he felt a blanket ban on fees would be, ‘easy for tenants to understand and enforce themselves.’
After the debate, David Cox, Chief Executive of ARLA Properymark, 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.’
Isobel Thomson, Chief Executive of the National Approved Letting Scheme, also observed: ‘“[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.’