Suggestions for letting agents to ‘consider their business models’ in preparation for the approaching ban on upfront fees have been made by the Government.
By April 2019 at the earliest, we are expecting to see a ban to upfront fees charged to tenants by letting agents. This has come to light as part of the Tenants’ Fees Bill draft, and looks as though it’s here to stay.
An online petition reaching 10,000 signatures has called for a cap on fees instead of a ban. However, Neil Cobbold, the Chief Operating Officer in the UK for rental payment automation provider PayProp, has said that the Government’s comments reinforce its preference for the ban. His view is that capped fees would encourage agents to make increases elsewhere, which would result in little change overall financially for those involved.
PayProp is keen to remind agents that there are ways to minimise the impact of the ban. By streamlining their processes and implementing alternative revenue streams, agents can prepare themselves and allow for a quick and efficient response as needed.
Cobbold has said: “Not only can streamlining help agents to replace lost revenue, a slicker business model which embraces technology will improve an agent’s landlord proposition.”
Despite the positive outlook, the administration of the ban is not expected to be an easy road to go down. In regards to the Government’s aim of creating a ‘fairer, more competitive and more affordable lettings market’, a Select Committee for MPs has been run by the Ministry of Housing, Communities & Local Government. Their aim was to analyse the impact of such a ban, to determine whether it would achieve their expectations.
Big names in the industry, such as the Residential Landlords Association (RLA) and Trading Standards have had their say. A call for higher fines for those who do not comply with the ban has been made by Trading Standards, otherwise the costs of its enforcement will not be met. Alison Farr, Lead Officer at the Chartered Trading Standards Institute, believes that the proposed fine of £5,000 for a first offence and up to £30,000 for further offences are not enough.
Cobbold has acknowledged these comments in his response: “Trading Standards show that full and effective enforcement of the fees ban could be a significant problem.”
He continued: “A ban that is not enforced is pointless, and Trading Standards needs to have confidence that it has the necessary powers and resources to properly enforce the legislation, ensuring that non-complying agents don’t reoffend.”
Regardless of the possibility that there will be stormy seas ahead, the overall impression of the ban and the expectations for its future are positive. Cobbold concluded: “Despite the challenges, the upcoming fees ban is a certainty and will represent a significant shift for the industry. But that’s not to say the best agents who embrace change can’t continue to prosper in a lettings sector which continues to grow rapidly.”