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Landlords could do a better job than letting agents

Wednesday 24 January 2018

Landlords could do a better job than letting agents at managing their own properties, a tenant fees ban campaigner has told MPs.

Dan Wilson Craw, of Generation Rent, said that more competition between letting agents created by the fees ban meant he did not expect them to pass the full cost on to landlords.

Giving evidence to the Communities and Local Government Committee, as it examines the Draft Tenant Fees Bill, he said: “The English Housing Survey looked at satisfaction rates for tenants who had paid a fee at the start of the tenancy and those who hadn’t.

“We might assume that those who hadn’t paid a fee aren’t renting through a letting agent, and they were more satisfied with their tenancy by about eight percentage points.

“I am not sure that is something we can apply to the post-fee world but it suggests that there isn’t a huge difference in quality between self-managed properties and agent-managed properties.

“If anything, landlords who manage properties directly do a better job.”

But he admitted there was clearly a role for agents when a landlord isn’t living nearby.

Mette Isaksen, policy researcher at Citizens Advice, also took the view that the costs of the fees ban wouldn’t be passed on to tenants.

She said: “Assuming that the legislation effectively bans fees and there aren’t loopholes written into the wording of the legislation, we would anticipate that tenants will save hundreds of pounds over the time that they move.

“The average fee that a tenant pays to a letting agent is £400, according to our research.

“Because landlords are able to shop around for their agent and move if they are paying too high a price or receiving poor service, we’d expect for the letting agents to have to compete more actively for that work, whereas at the moment, tenants are forced to use whichever agent happens to have the property that they wish to be their home.

“So we’d anticipate few letting agents will be absorbing the vast majority of this policy as a result of this competition.”

She said a clause in the Bill about default fees created the potential for agents to find other ways – or ‘loopholes’ - of charging fees, by shifting fees ‘from an upfront cost to something that is embedded deep in your tenancy contract’.

David Smith, policy chief at the Residential Landlords Association (RLA), said: “I have agents who get 5 per cent of their turnover out of fees. I have agent clients who get 30 per cent of their turnover from fees.

“If you take 30 per cent of your turnover from fees then you have got two choices, and one of them is going out of business so that is probably not a realistic choice.

“So the money has got to come from somewhere and it will come from landlords or it will come from loopholing in the Bill, or it will come from both in reality because it is almost impossible to write a piece of legislation that doesn’t have a loophole in it.”

Adrian Jeakings, chairman of the National Landlords Association (NLA), added that MPs’ time would be better spent concentrating on changing the way in which deposits work.

He said: “The reason why tenants often don’t pay the last month’s rent is because they need to have an extra second deposit for the next property and the first month’s rent.

“We think the time has now come to convert the existing tenancy deposit schemes around, get them to hold tenants’ deposits for tenants, rather than for landlords, and to provide a guarantee to landlords that they are holding that money and then to have a small insurance scheme that covers the transition period.”
 

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