Industry would die if fees are banned, warning

There would be no private letting industry left in England if agents were banned from charging fees.

Jonathan Morgan, who heads up Morgans in Leeds, said: “If there are no fees, agents won’t be able to trade. To ban all lettings fees is crazy – it’s like saying a mortgage broker can’t charge a fee for finding a mortgage.”

He was speaking after Shelter succeeded in its campaign to ensure that all upfront fees charged to tenants are abolished in Scotland, since when the charity has turned its fire on agents in England.

Morgan said a ban would be disastrous, but he called for all agents to provide transparent fee structures which prospective tenants were made fully aware of.

He said: “Any agent worth its salt would sign up to such a scheme where they provide tenants with a breakdown of charges before a tenant has to commit to anything.”

Shelter’s recent YouGov survey said 23% of tenants felt ripped off by letting agents, but Morgan believes that by introducing an agreement that clearly shows what fees are charged, any mistrust between agents and tenants would be eradicated.

Morgan said: “Of course it’s essential that fees are fair. With such a booming lettings market and some unscrupulous agents entering the market to take of advantage of this, tenants must feel safe and secure in the lettings process and landlords should also have a clear understanding of what their agent is charging their tenant.

“To talk of outlawing all charges is just not practical as there are significant cost implications for operating a business in the first place, not to mention carrying out viewings, processing applications and general administration that have to be met.”

Shelter has also called for a new five-year private rental contract to be introduced to give people renting greater stability.

Shelter believes that a new type of tenancy called the Stable Rental Contract should become the norm across the rental market in England to help tenants put down roots and give landlords greater certainty over returns.

It suggested that under the five-year contract, rents should increase in line with inflation each year, giving tenants and landlords predictable outgoings and incomes.

Morgan commented: “The premise of a five-year contract with the ability to give notice on either side is not sound. Currently the average tenancy length in our city and the north Leeds area is around 8-10 months and this is a reflection of the lifestyle of the vast majority of our client group.

“They rent for a shorter period because they actually want short-term commitment and flexibility and have no interest in being committed for a longer term. If it’s the case that renting is a stepping stone for most people, and evidence suggests that this is very much the case, then it follows that a five-year tenancy will only appeal to those who do not envisage buying in the next five years.”

Morgan said that the European model has long been held up as a reference point for what is happening in the UK housing market but he thinks it is highly unlikely that the UK will follow the same path.

He said: “In Germany, for example, the most pro-rental market in the EU, around 54% of people rent their home, but it is also true that the cost of buying a property has always been much higher, with average deposits at around 40%. In simple terms, the buying public have always had to have significant equity.

“This is not what the British public have become used to, and whilst it might take a while, the consensus is that loan to value requirements will fall back over time towards levels at which the volume of transactions will once more increase.”

He added: “We are bemused by the proposal to introduce a five-year tenancy, particularly when this would include break clauses on both sides, thereby providing the tenants with no security whatsoever.”

Morgan said that the Government should resist Shelter’s calls and not be panicked “into restructuring the private rented sector”.

*Consumer watchdog Which? has now joined in the clamour over letting agents’ fees which was started by Shelter.

It drew attention to the issue during a Radio 5 Live ‘summit’.

Which? says on its website that it is concerned that the lack of transparency in tenant fees, alongside a housing shortage, means that there is no incentive for letting agents to reduce their prices.

It adds: “It’s not right that consumers are having to pay fees to letting agents when it’s not clear what they’re getting in return.”

Article courtesy of Letting Agent Today and has attracted many comments

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