Letting agent fees ban: 2018 rules change overview

In 2016, the government announced they would ban letting agent fees to tenants. What progress has been made and where are we now?

Jim Kersey Last updated on 07 April 2020.
Letting agent fees ban: 2018 rules change overview

Renting can be an expensive and complicated process. Exactly who is responsible for all this expense and complication is a hot topic for debate but there’s no denying that letting agents play a major role.

It's little surprise then that so many people are looking forward to the government's long-discussed ban on letting agent fees. The ban should finally come into force in 2018 along with some inevitable changes for the rental sector on all sides.

So what are letting agent fees and how will the letting agent fees ban impact you?

What are letting agent fees?

A letting agent is a firm or an individual that helps landlords to let their properties and the fees are the costs they charge for doing so. They help landlords to find tenants by advertising and promoting their properties to potential renters, as well as showing tenants around the properties and essentially playing matchmaker.

Letting agents will also offer to carry out checks on prospective tenants to ensure they are trustworthy and are likely to meet their rent obligations. They arrange for deposits to be taken from the tenants and process the rent each month and act as a manager for the landlord throughout the tenancy.

All of this, of course, costs money and at the moment, both landlords and tenants are paying hefty letting agent fees to cover all this. And herein lies the problem, both sides are paying for a service that is only really of benefit to one side: the landlords.

Types of letting agent fees

Letting agent fees come in many different guises, and are currently payable by both tenants and landlords. Some are flat fees payable at the beginning of a tenancy, some are flat fees charged at the end of a tenancy and some are charged as a percentage of the monthly rental.

All data below taken from LettingFees.co.uk and Property Investment Project

Letting agent fees payable by tenants
Inventory fees
average cost £120
Admin fees average cost £311
Tenant reference check fees average cost £154
Tenancy renewal fees average cost £117
Guarantor check average cost £151
Change of occupancy fees average cost £357
Check out fees average cost £121

N.B - These tenancy fees are not charged by all letting agents, but these are the most commonly charged fees.

Letting agent fees payable by landlords
Let-only fees
average cost £750 (one-off)
Let and rent collection fees average cost around 10 per cent of monthly rent
Inventory fees average cost between £150 and £400
Reference check fees average cost £150
Property management fees average cost around 10-15 per cent of monthly rent

Letting agent fees ban: what's happening?

In his 2016 Autumn Statement, the then Chancellor of the Exchequer, Philip Hammond, announced that it was the government's intention to ban letting agent fees. He stated:

"In the private rental market, letting agents are currently able to charge unregulated fees to tenants. We have seen these fees spiral, despite attempts to regulate them, often to hundreds of pounds. This is wrong. Landlords appoint letting agents and landlords should meet their fees. So I can announce today that we will ban fees to tenants as soon as possible."

He added that banning the tenancy fees will help some 4.3 million households that currently pay these fees each year. The official consultation has now taken place and the intention is to make the cost of renting more transparent for tenants. Following the consultation, Gavin Barwell, the Housing Minister added: “We’re determined to make all types of housing more affordable and secure for ordinary working people. Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.”

Even though letting agents are now required, by law, to display their fees either on their websites or in an obvious location within their branches, many tenants are still hit with unexpected and often unaffordable fees. These are paid on top of their rent and deposit when they come to initiate a tenancy. Clearly there is a problem here.

But the ban on letting agent fees is not the only change the government is making in an attempt to solve the issue. Back in April 2017, the government introduced a range of new requirements intended to protect renters from unscrupulous landlords. These included giving councils the power to impose fines of up to £30,000 on landlords who continue to act unlawfully.

When will letting agent fees be banned?

Exactly when the ban on lettings agent fees for tenants will come into force is still unclear, and the government has published no official timetable at the time of writing. All we can surmise at this point is that given the fact the proposal featured in the June 2017 Queen’s Speech, there’s a good chance it will be bought into legislation before the next Queen’s Speech in 2019.

What will the ban mean for tenants?

The letting agent fees ban looks to be great news for tenants. Anyone renting a home after the ban is in place will have a much clearer view of the cost of renting from the outset, with just the rent and the deposit to pay. This should help renters plan their finances and rent the best home for them, without having to worry about additional or unforeseen letting agent fees.

There are some fears that rents will increase as a result of the letting agents fees ban, though we have to assume for now that the industry will take the hint and offer a more transparent service. In any case, the costs incurred by the letting agents should already be covered by fees paid by landlords.

What will the ban mean for letting agents?

There is a general consensus that the letting agency industry will have to absorb the cost of the changes. The fees they charge currently help them to generate profits and these profit margins will simply have to come down in order for them to toe the line and treat renters fairly.

What will the ban mean for landlords?

Landlords may find themselves paying slightly higher fees in order to help letting agents recoup genuine costs incurred.

However, this increase is expected to be minimal, since landlords are already charged for the costs incurred by the agency they are working with.

What does the industry think about the letting agent fees ban?

The response to the planned ban has been generally very positive from those advocating tenants' rights, but there is some trepidation among landlords about the impact a ban might have on them.

The National Landlords Association said: “We will of course work constructively to ensure that whatever changes are imposed on the sector are as fair and undamaging to landlords as possible.”

Meanwhile, consumer rights advocates Which? wholeheartedly welcomed the news of the ban, stating: “Navigating the rental market is stressful and expensive. It’s right for the government to ban unfair fees, as this will help renters with the significant costs of moving home.”

What seems certain is that 2018 will bring a major shake-up that will see letting agents no longer able to charge unfair fees for their services, which can only be a good thing for the rental market as a whole.

About the author:

Jim brings together unique data insights, contextual knowledge and thought provoking themes, to shed new light on important issues affecting both UK businesses and individuals. Read more

Looking for a better landlord insurance deal? Compare landlord insurance now

If you have any feedback on this article please contact us at [email protected]