Lettings News,Tenant Fees Ban

ARLA Propertymark Gives Evidence to Welsh Assembly for Tenant Fees Bill

Emily Morley - July 10, 2018

Further discussion about the Welsh Tenant Fees Ban has arisen, as ARLA Propertymark gave evidence to the Welsh Assembly on the Renting Homes (Fees etc) (Wales) Bill as to why the company should be exempt from certain factors.

The Welsh Tenant Fees Bill was introduced in June this year, sharing a common goal with the one currently in progress in Englandto put an end to letting fees. The first stage of the bill is now in progress, with oral evidence sessions currently taking place. The second session took place last Thursday.

Welsh Labour politician John Griffiths began the session, which was attended by David Cox, chief executive of the Association of Residential Letting Agents (ARLA) Propertymark, Charlotte Burles Corbett, managing director of Welsh estate agency Parkmans, and Isobel Thomson, chief executive of the National Approved Letting Scheme (NALS).

During the session, they discussed current fees and whether they reflect the costs incurred by letting agents.

David Cox said: “I would say they do reflect the reasonable costs that are incurred by agents. Research from within ARLA’s membership indicates that the average fee from ARLA members is about £202 per tenant. That is England and Wales; I’m afraid I don’t have Welsh-specific figures.

“Last year, we did a survey of over 1,000 agencies—1,008 to be specific—on what they actually do for the fees that they charge. It came out that, on average, it takes about eight hours to start a tenancy. It covers three main topics, which is tenant referencing, which, when thinking about it, in a sales transaction, is probably akin to a mortgage application fee; contract negotiation—translate that across to sales, that’s probably your conveyancing charges; and then the inventory, which is akin to a survey.

“If you think that, in a sales transaction, you pay three different parties, you generally pay them a lot more than £202. In a lettings transaction, you pay it to the agent that does it. The buyer pays that in the sales; the tenant pays that in in the lettings transaction.”

Isobel Thomson commented: “We accept that agency fees can be perceived as onerous additional payments, with little or no understanding from the tenant’s perspective of why they’re being charged. But we believe that the fees charged are a fair reflection of the time spent, particularly at the start of a tenancy.”

David Cox also mentioned that last year the ARLA commissioned Capital Economics, a leading market research agency, to analyse the possible economic impact of the ban. He said: “Agents are likely to pass through 75% of the costs of the loss of tenant fees on to landlords. Landlords are likely to pass on 50% of those costs to tenants, and therefore tenants are likely to see a £103 per tenant, per year rent increase as a result of this.

“…At £103 per year, that is less than the £202 on average that is charged. Therefore, tenants that move on a regular basis will see a saving as a result of this. But when we are talking about longer term tenancies, Westminster has issued a consultation only this week…when everybody is trying to encourage longer term tenancies in the private rented sector, the over-under of this policy is two and a half years, and therefore whilst encouraging longer term tenancies, this Bill is actually going to increase the costs for those people who live in longer term tenancies.”

The full progress of the Renting Homes (Fees etc.) (Wales) Bill is available to see on the National Assembly for Wales website.