Tenant Fees Bill

Written evidence submitted by Will Linley, Director, Linley & Simpson Group Ltd (TFB55)

I am writing with reference to the above proposed legislation.

I have 30 years’ experience as a letting agent, having run my own agency for the past 20 years; which is now the largest agency in the Yorkshire region.

Whilst I wholeheartedly disagree with the proposed fee ban, and fear the unintended consequences that will manifest as a consequence, it is clear that this government is intent in introducing the ban come what may. That being the case, agents will have to adjust their business models in order to survive, and inevitably many agents will not survive. It is important therefore that a degree of reasonableness is applied in the drafting of this legislation, that will allow agents to make reasonable charges to tenants where a default charge should be applicable. There is evidently debate going on at the moment which suggests that no default charges should be allowed, but this must be resisted if agents are going to be able to continue to operate, and offer some kind of balanced service to tenants.

The most common ‘default’ scenarios are:

- Early Termination – Where a tenant wants to break a contract mid tenancy and the agent has to find new tenants in order to facilitate an early surrender. The landlord should not be expected to pay the agent to re-let a property because a tenant wants to break their contract, and the agent should not be expected to work for nothing. Under the current process, the outgoing tenant would be required to pay the agents’ letting fee and the rent up to the date that the new tenant moves in. This situation is a regular occurrence, which is willingly accepted by the vast majority of tenants, and offers a reasonable alternative to the tenant that would otherwise be obliged to continue to meet their obligations under their tenancy agreement.

- Change of Sharer – Where a property is let to multiple tenants on a joint and several basis and one of the tenants wants to change mid tenancy. In this situation the agent will have to administer the change of tenant (referencing of any new tenants, re-registration of deposits, agreeing inventories, arrange signing of revised tenancy documents, etc), and under the current process the tenants would be required to pay a fee to cover this additional administration. If no fee is payable, then the agent or landlord will not allow the change to take place and tenants could be forced to remain in properties.

- Late Payment Charges – Where a tenant is late with payment of rent, which may result in the agent having to carry out additional work in order to collect payments, and the landlord may suffer financial hardship resulting from the none payment. Most agents currently have a late payment penalty charge written into their contracts, which offers a modest contribution towards any incurred costs and a deterrent to tenants who may otherwise see no consequence as a result of none payment.

It is my view that the above default charges should be allowed, albeit subject to a cap if necessary.

Other points to consider:

- Guarantor referencing – In order to qualify some higher risk tenants, it is common practice to make the tenancy subject to a guarantor. To continue with this practice post ban, the agent will be faced with referencing both the tenant and the guarantor. Without the ability to recover any costs via tenant fees, agents will choose to avoid ‘higher risk’ applicants and focus on better calibre applicants in order to avoid the extra referencing work. This will disadvantage the poorer quality tenant, who will find it more difficult to source accommodation. If a tenant needs a guarantor in order to qualify for a tenancy, then the agent should be allowed to charge the guarantor to cover the additional administration costs.

- Holding Deposits – Agents must retain the ability to collect a holding deposit in order to reserve a property for an applicant. Without this the letting process will descend into chaos. Holding deposits benefit both parties; the tenant has the comfort of knowing that a property has been reserved and the agent/landlord takes comfort from a financial commitment from the prospective tenant.

- Deposits caps/pet owners – For the deposit system to function effectively, a deposit should exceed one months’ rent (in our case 1.25 x monthly rent), ideally up to 6 weeks rent should suffice. It’s quite frequent for tenants, particularly when they haven’t looked after a property, to fail to pay their last months’ rent. In which case the deposit would cover the arrears, and if the above principle is applied, then there is some surplus in the event of cleaning or damage to be attended to at the end of the tenancy. If the deposit is restricted to one months’ rent or less, then significant problems will occur as a result. It is also common practice, where a prospective tenant has pets, to increase the deposit to a higher sum, to reflect the additional perceived risk of damage. Most pet owners are more than happy to pay an enhanced deposit in order to secure a tenancy. If this practice is no longer allowed, then landlords will be much less inclined to accept pets in their properties and this will have a negative impact on pet owning tenants.

I hope the above points highlight that a lot of the practices put in place by agents are as much about finding solutions for tenants as they are for landlords, or fee earning options for agents. If these points are not fully considered, then I fear that it will be to the detriment of the tenant, and legislation that I presume is meant to benefit tenants will in fact have the complete opposite effect.

Regards

Will Linley   

Director

June 2018 

 

Prepared 13th June 2018