Is the ban Letting Agent fees or disbursements?

Four things are abundantly clear the government wants:

1. to make renting and moving cheaper or even 'fee free' for tenants,
2. to foster institutional investment in the private rented sector,
3. to tax buy-to-let landlords out of the market hoping they will invest in institutions who might do it better.

At Ringley we support making renting and making moving cheaper. We also frown on profiteering from tenants who simply need a home - and there is some awfully high charges levied often up to ￡200 per tenant for 'referencing and tenancy fees'. 

What needs to be grasped is that there is a difference between 'fees' and 'disbursements'. A fee being monies paid in exchange for advice or services, a disbursement being payment, made to a third party, for information/documents etc... to facilitate a transaction then claimed back from the person wanting the service or transaction upon which the disbursement relies. 

To see a way forward I thing we need to analyse the real fees and costs incurred:

- tenant finders fees. I believe it is right that the Letting Agent is paid by the Landlord for introducing tenant(s),

- referencing fees. I believe a Letting Agent would be negligent IF they suggested their Landlord Client accepted tenant(s) without referencing them. Now until the government chooses to provide a free referencing service references are a necessary disbursement every new let transaction incurs. 

Whether the Agent uses Maras, Paragon, Agent Assured, VeriCheck, Experian or whoever disbursements will be incurred. I don't believe it is right for the Landlord or the Letting Agent to pay referencing fees as neither can know whether disclosures made by the tenant(s) are true or whether they will pass. Tenant(s) should pay their referencing fees unless they have another way of warranting that their rent will be paid in full, i.e., to pay a years rent up front in advance! 

However there is an opportunity for the government to dramatically reduce up front tenancy costs by legislating that letting fees for tenant(s) are abolished but letting referencing disbursements remain. This would be a win for tenants and would not weaken an over crowded lettings market that is already threatened by the rise of on-line Agents. 

Alternatively, if the government wants to abolish referencing disbursements as well as letting fees then it should centralise and open up the records it holds for FREE to all Letting Agents and Landlords. 

Government records that could underpin FREE referencing include: 

- PAYE tax records (to verify earnings), easy now all employers have to file electronically,

- CRB checks (to verify ASBO cases and criminal activity)

- Housing Act court cases (to check previous evictions and breach actions)

- Land Registry data (to verify guarantors)

- Tenancy Deposit Service disputes (to gauge tenant waste/neglect)

This data would need to be centralised and easily accessed for FREE. And, the government could force the credit agencies to share credit checks

Turning now to tenancy fees - in the commercial world typically each party pays their own costs including professional representation if desired. The problem with the lettings industry is twofold: 

- firstly, tenants are rarely professionally represented, and

- secondly, mostly the tenant(s) are the only ones paying tenancy fees. 

As most Letting Agents adopt the same tenancy for every let it is reasonable that to accept that this task is no more administrative than filling in the direct debit form to pay the rent. And, I believe it is reasonable that IF the landlord wishes to use his/her own agreement then they should pay the costs of any additional administration incurred. 

Given that there are mobile Apps such as PlanetRent that take all the admin out of the deal (offers, referencing, move in monies, e-signing contracts, move in checks and compliance), for just ￡12 a tenancy an Agent can do the whole deal without a shred of paper. Admin staff can be redeployed to lettings management or accounts saving more than ￡12. 

In respect of item 2 on the government’s agenda promoting institutional investment - Ringley are retained and advising top institutional build to rent developers in England and Ireland. With the housing need so acute, supply is the answer so the more the better. Bring it on. 

In respect of items 3 (taxing buy-to-let landlords) - what is the justification for taxing buy-to-let landlords differently to institutional landlords, how can that be fair? Just because one is a company and the other an individual. Are all individuals not professional, it is easier to regulate a company rather than an individual, both are legal entities.  

It is well known that the government has failed again and again at meeting it's own housing targets.  And, that the government is equally scared about the aging population.  So if a buy-to-let landlord is providing both a home to a tenant and providing for their old age/pension through property wealth instead of expecting government handouts than with the pensions time bomb - what is this policy nonsense and who is fooling who!

Hopefully this article sets out reasonable compromises the government can make not to hurt Letting Agents too badly, let them keep their disbursements as App technology such as PlanetRent can remove admin and bring operating efficiencies.