Letting agents are in a quandary with the ban on fees looming large, and it is going to be the tenants in the UK who will be hit the hardest, losing hundreds of pounds should they continue to occupy the properties. This is what the Association of Residential Letting Agents (ARLA) strongly believes, and it also contends that there are thousands of jobs at stake, should the ban come into force.
With deliberations still on the cards about how to enforce the ban, the outcome is going to affect the tenants and letting agents alike. Landlords also are not very happy with the grim prospects and there is industry-wide discontent in the private rented sector, though the move is going to affect the economy as well.
Letting agent fees account for close to 20% of their revenues and go towards the cost of setting up important checks while drawing up a tenancy agreement. The ban though, is going to hit the landlords as the agents are simply going to pass on these costs to them by hiking agent fees. Most of the landlords in turn, would be passing the buck to the tenants who get to suffer the most.
The consequences would be inflation of rents by at least £100 per year on an average, and if the landlords manage to pass on the proposed increase in agents’ fees to the tenants, they would end up shelling out £250 to 275 per year.
With the lettings sector accounting for close to 58,000 jobs across the UK, there are going to be thousands of jobs at risk, though not all agents are expected to pass on the increased costs, with some passing on three-quarters of the cost and bearing the rest. Research reports indicate that there could be a fall in demand for properties as landlords plan to cope up with the situation and refrain from investing further in properties.
A fifth of the current landlords are expected to sell off some of their rental properties, and some plan to dispense with the services of letting agents instead of paying them more. The funds allocated for property maintenance are also expected to become scarce, with landlords being reluctant to bear any of the additional expenses.
The ban will ultimately affect the government treasury as well, as the Chancellor of the Exchequer is currently collecting close to £400 million in employee taxes from the letting agents, which will reduce drastically if the ban comes into force. Letting agents feel they have been given a raw deal, given the fact that they were being paid the lowest fees all along, as their counterparts in France and the U.S. earn much more by way of letting agent fees.