Tenant Fees Bill

Written Evidence submitted by LiFE Residential Ltd (TFB48)

Document Summary:

1. Who we are

2. Reason for submission

3. How agents will deal with the tenant fee ban

4. The impact to LiFE Residential

5. Our suggested remedies

1. Who we are:

LiFE began with 1 office in Parliament View and 3 members of staff. Today, we are one of the UK’s leading privately owned real estate agencies, specialising in new build luxury developments. We have 13 offices located across all London zones, and have expanded internationally with offices in Hong Kong, Singapore and South Africa. Our services include lettings, sales, serviced apartments, financial services and property management. Still guiding the way are our founders, property experts Jonathan Werth and Jason Dienaar, who hold more than 4 decades worth of property experience and established the company in 2000.

Our core values are; integrity, transparency, humility, respect, trust and empowerment.

2. Our reason for submission:

Whilst we do appreciate that the government is aiming to create a sense of fairness and transparency for tenants by enforcing the tenant fee ban, we feel that not all repercussions have been considered, leaving agents in an undesirable position. The time and effort spent in trying to satisfy the concerns of the tenant, could be spent on creating a more regulated industry where fairness and transparency amongst tenants, landlords and agents alike is apparent.

The effect that this ban will have on the industry, the companies and their employees is extremely unfavourable which has created a sense of worry in the market. .

Tenant fees are definitely not an agent’s main source of income. Within LiFE Residential, the lettings side of our business, tenant fees make up around 10% of our gross lettings/management fee income. 10% is a significant amount when you consider the ramifications of an agent losing this income.

3. How will agents deal with the tenant fee ban:

Absorb the loss

For an agent to absorb the loss of the income caused by the tenant fee ban, they would need to cut back on costs. As most agents already work with a tight budget, the most probable area in which they could cut costs would be recruitment and retention of staff.

This means that service standards for landlords and tenants would drop. Even a loss as small as 10% of staff would mean all services would suffer;

· Lettings:

§ Less negotiators mean fewer people to carry out viewings, causing longer waits for tenants;

§ Less personalised services for landlords and tenants;

§ Less time to ensure properties are being priced correctly in the market;

§ Less time to sufficiently qualify applicants and provide them with the standard of care they are current used to.

· Admin:

§ Less admin support would affect the move in times;

§ It will delay referencing and other move-in processes, meaning longer vacant periods for landlords and longer waits for tenants.

· Property management:

§ Less property management support would affect the service tenants get in regards to maintenance issues and deposit refunds.

· Other satellite staff:

§ There is not one role in an agency that relies only on itself, any cutbacks would have a domino effect on other departments causing bottlenecks in the work flow and ultimately affecting the service tenants and landlords receive.

Pass the cost onto the landlords

Passing the cost over to the landlord would bring the yield of their investment down. This issue along with so many recently implemented industry charges, would put landlords off of investing in London. Landlords will look for other ways in which they could recover the costs.

They could either find a cheaper agent (which will lead to an increase in rogue agents with more landlords looking for price over service) or they would increase the tenants rent, which would then negatively affect the tenants (not to mention the industry) leaving tenants worse off than before the enforcement of the tenant fee ban.

I think where agents pass the costs to the landlords and the landlords in turn increase rents, tenants would then need to move more often to get competitive rents and ensure that the competitive environment causes any rent increases to stay fair and valid. This would increase moving costs for tenants, increase fees for agents (more referencing, advertising, deposit negotiations etc) and added costs for landlords (their own agreement fees, inventories , check outs etc). This would also affect a tenant’s lifestyle having to move more often, meaning more upheaval to them.

Find other revenue streams

Agents will need to become more flexible in their roles. They will need to open new revenue streams bringing in different services, which means splitting their focus from their main role and again this would impact on the service provided to landlords and tenants. As an agent focused solely on letting and management, we pride ourselves on our knowledge, professionalism and expertise. Adding other services within the same staff frame would mean the focus given to our core roles (letting and management) would be affected and services again would drop.

Also with landlords again taking on more services this could cause them to look to recoup that cost through the rental, which would again have the same effect as directly passing the cost over to landlords. Ultimately the tenant doesn’t win.

4. The impact to LiFE Residential

For Life Residential, we would lose about £1.1 million in gross income annually. We have around 4000 tenancies/renewals a year which is an average of around £275.00 in admin fees per tenancy per year. The effects that this loss in revenue would have on the company:

· Belts would need to be tightened and staff benefits would need to be cut or reduced. This could lead to a discourse among the staff which would cause higher turnover and therefore a worse service provided to landlords and tenants.

· Staff would need to be cut or salaries/increases would need to be lowered/stopped. Again this could lead to a higher staff turnover which would lead to a poor service provided.

· Increase in landlord fees, which means either landlords could look to leave and find cheaper agents (fear of rogue traders increasing again) or they could insist on increasing the tenants rent (ultimately tenant still pays out the same or more)

· Increase in services provided, staff would have a higher work load and more responsibility to complete in the same time and for the same pay, which could cause an increase in turnover and again a worse service being provided to landlords and tenants.

5. Our suggestions

We have come up with a few suggestions which we believe to be fair for tenants and less drastic to the industry service providers.

1. Cap tenant fees:

· Making fees fair and reasonable across the board.

· Providing all parties; tenants, landlords and agents with peace of mind and clarity.

· This way, tenants can see what they are paying for as opposed to having hidden fees within rent increases.

2. Fee cap vs tenant profile:

· Protect the lower income earners and individuals relying on housing benefits by providing them with discounted rates.

· Anyone who is able to afford £300 per week rent should be paying for the service they receive, at reasonable, industry-wide rates.

3. First time renters benefit:

· Ease first time renters into the market by providing them with the benefit of reduced fees.

· Encouraging more individuals to enter into the rental market.

June 2018

 

Prepared 13th June 2018