Larger agents that break the government’s proposed ban on letting agent fees should be fined up to £30,000 to ensure they comply with the new laws, according to a leading charity.
The Chartered Institute of Environmental Health said that in its recent submission to the government consultation on banning letting agent fees that fines of up to £30,000 for larger property agents would be in line with the civil penalty for committing a banning order offence.
In its submission the CIEH said that a complete ban on all letting agent fees would remove barriers tenants face in moving out of a poor quality homes and improve standards.
The membership body has also recommended that holding deposits should not be exempt from the ban as they might allow for loopholes to exploit tenants.
Tamara Sandoul, policy manager at CIEH, said: “While the vast majority of letting agents are responsible, there are those who exploit tenants by charging them extortionately high fees. A comprehensive ban on letting agents’ fees is a very positive step forward.
“It will give tenants greater freedom to move out of properties that are hazardous and in poor condition, which in-turn should drive up standards and quality of rented housing.”
Recent research from Generation Rent found that the average two-adult household renting a home is paying up to £813 in upfront letting agent fees.
Chancellor Philip Hammond said in his first Autumn Statement that letting agent fees would be banned after spiralling to hundreds of pounds.
The move aims to help 4.3 million households currently in rented accommodation who are hit with an average of £337 in charges on top of what they pay in rent.
Critics have branded the decision a draconian measure that could see landlords hike rents to recoup losses.
However, according to figures from Shelter, the removal of letting fees in Scotland did not cause any spike in rents. The ONS index shows that private rents have inflated by 5% in Scotland since the law on fees was clarified in November 2012, and in England rents have risen by 9% over this period.
“We do not expect to see higher rents because of the ban as the cost of referencing new tenants is likely to be small in comparison to the costs of maintaining a property to a good standard,” said Sandoul.
“At the moment managing agents are charging both the landlord and the tenant fees, but this ban should help to increase competition between letting agents and help to drive the total costs down.”
David Cox, chief executive at ARLA Propertymark (Association of Residential Letting Agents), said: “Research conducted by Capital Economics for ARLA Propertymark shows that referencing checks undertaken by agents take, on average, eight hours to complete. It is therefore right and proportionate that the industry is recompensed for this work, which benefits tenants.
The research also showed that letting agents stand to lose around £200 million in turnover, costing the sector 4,000 jobs. Landlords themselves would lose £300 million, meaning they will seek to cover their losses by increasing rents to tenants. On average, Capital Economics found that this will cause the average rent to go up by £103 per tenant, per year.
“Ultimately this means that tenants who move more frequently will receive savings on their overall costs but longer term tenants, who are likely to be lower income families, will see a loss as their rents rise year on year. As a result, the proposed ban contradicts the government’s stated aim to encourage longer term tenancies, as tenants who stay in their homes for the long-term will end up shouldering the costs of those who move more frequently.”
Lots of renters complain they are hit with extortionate fees from letting agents for unnecessary administration costs.
They often include costs such as processing documents, bank transactions or credit checks and many tenants find themselves being hit with them at the last minute.
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