The boss of a Swindon lettings agency has hit out at 'terrifying' new lettings fees in a publication that aims to share best practice amongst policymakers and business leaders.
Sue Gidney, managing director of Richard James, said the move could hit agents' turnover by between 15 and 25 percent.
The Parliamentary Review is a series of publications which focus on an individual governmental policy area such as finance, healthcare, transport, education, technology, energy.
Writing in the edition focussing on housing – which features a forward by prime minister Theresa May – Sue said: "Competitive introduction of more letting agents has, over the course of the last couple of decades, already driven down management fees – that is, our turnover.
"It used to be the case that the fees that we charged to cover management were roughly 14 to 15 percent of the costs involved. These days, though, it can be around eight to nine percent.
"This has been the result of quite natural market forces, and has prompted us to do more with less. However, the new changes being introduced will be a defining generational issue for letting companies.
"The key change here is the tenancy fees ban. Despite initially saying that they wouldn’t introduce it, the government have nevertheless brought it about.
"As a letting agency, we could formerly ask for an upfront fee from our tenants that would go some way to cover our considerable administration costs, the costs incurred by viewings, negotiations and property inspections, as well as those of the significant communications and queries raised by applicants and tenants before and during tenancy.
"Now, however, we will now be legally barred from as asking for such a fee.
"Our industry predicts that this could slash letting agents’ turnover by anywhere between 15 and 25 per cent. This is a terrifying prospect for many in the industry – many, I’m sure, will go under as a consequence, as in very many cases this will exceed any profit."
She said agents would pass their fees to landlords, who in turn would seek increased rents, and may leave the industry altogether.
"This will have the obvious knock-on effect of ramping up the cost of renting. Not only is this contrary to the measure’s intended aim of reducing costs to tenants, it will also reduce the number of landlords in the private rental sector, adversely affect stock levels, and has already caused the closure of a number of existing agencies.
"It has and will continue to put many people out of work. It’s hard to think of who will actually benefit from this initiative," she said.
Sue said her company was in a good position and would "weather the storm."
The ban on letting agents charging fees to tenants will come into force on 1 June. The new rules will involve deposits being capped at five weeks’ rent and landlords will be banned from charging fees for anything other than contract changes or termination when requested by the tenant; utilities, communications services and council tax; or issues for which the tenant is at fault, such as the replacement of lost keys.
Introducing the Tenant Fees Bill into Parliament in May 2018, the government said the ban on fees – which typically included drawing up contracts, preparing inventories, collecting references and running credit checks, and making phone calls and sending letters postage would save tenants around £240 million a year. Fees averaged just under £300 but some agents were found to be charging up to £700.
"Tenants across the country should not be stung by unexpected costs," said housing secretary James Brokenshire.
The Tenant Fees Bill was backed by Citizens Advice, who found that 64 percent of tenants experience problems paying letting agents' fees, and 42 percent have to borrow money to cover the cost, and by housing charities including Shelter.
The article can be read in full at www.theparliamentaryreview.co.uk/organisations/richard-james