Letting fees banned
Letting Fees Banned? Are Rents Going To Rise?
There have been some major changes affecting the rental market in recent times. Changes such as additional stamp duties to changes in tax relief on things like mortgages. It appears the deck is being stacked against landlords and their tenants.
So will the planned legislation for banning letting agent fees cause rents to rise?
Which Letting Agent Fees are Banned?
The ban on letting fees across the UK, are being introduced to provide a fair deal for tenants. The key is to stop renters being subject to hidden charges and paying out extra money.
While the Government appreciates many of the letting agents operating above board, there were a minority who take advantage of potential tenants when it comes to these charges which has to stop.
According to the evidence, 1 in 4 tenants think they have been charged inappropriately by either a letting agent or a landlord. These additional fees meant people paying £500 and over and above the deposit need to find a big amount to start renting a property. These charges can be for a wide range of services such as references and credit checks.
The Government hopes that the banning of letting charges will lead to more transparency in the market, better competition and will stop tenants from being taken advantage of by some letting agents.
Will it Lead to Rent Rises?
While no one doubts a need for a fairer deal for tenants, there could be some unintended consequences to the banning of agent fees. This could include renters having to pay more in rent to cover the lost costs for landlords. There have been a lot of warnings across the rental industry that this is exactly what is going to happen.
Others disagree. Those who believe that the market defines the rent say that people will only pay what they want to pay and no more, in other words market forces will come into effect. Scotland banned letting fees some time ago and there has been no major impact on rental prices.
Those who think it will impact say landlords are going to have to pick up those extra fees that letting agents charged for things like credit checks. For those who have a good bottom line and are earning a decent profit, there may not be the rush to raise the rents. Those who have a more marginal bottom line could well find the temptation too big to resist.
Details of the letting fee ban were included in the recent Queen’s Speech at the opening of parliament and it is thought it will come into operation at some time later in the year, though a bill still needs to pass through the Commons into legislation.
What will happens next, well that depends where you stand. Most landlords, will try to absorb these charges in the short term, particularly if they operate in a competitive market. Letting agents will have to review how they charge and where they can potentially recoup their losses.
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