As I am sure you are aware, the proposed ban on fees being charged to tenants was included in the Queen’s Speech and is therefore set to become law during the next period of Parliament.
Whilst much of the industry and the likes of ARLA are still trying to see if they can lobby for changes and a reduction in a “blanket ban” it looks likely that legislation will be introduced that enforces a total ban on any fees or charges being made to tenants for the lifetime of the tenancy.
This will be much easier to introduce and police than any “watered down” or partial ban which would be likely to see greater confusion and probable breaches than a total ban. The legislation will, in my opinion, also ensure that tenants cannot be charged by third parties so any thoughts of agents rearranging the way in which fees and charges are collected seems highly unlikely.
I believe that the legislation will be introduced fairly quickly once Parliament goes back after the summer recess. This is based on the fact that the idea of a tenant fee ban is universally popular across all parties in Parliament and indeed emanated from the House of Lords. It will therefore have a pretty smooth passage through to becoming law. With around 8 million tenants and 2 million landlords the maths also make it a vote winner and the Government could do with winning a popularity contest about now!
Whilst the exact timing and detail has yet to be announced, many of my clients have already taken actions to address their operations post ban by reviewing every aspect of their service offering, making greater efficiency savings and by offering a better overall proposition to landlords who are paying higher fees and attracting better, high quality tenants.
My research shows that tenant fees account for between 15% and 20% of my client's letting revenues and it is therefore crucial for every agent to have a clear and well thought out plan for the future of their business.
Leaving action until the eleventh hour may seem attractive but I have already seen some clients gain market share in recent weeks by offering innovative new approaches and products that are winning them business against their competition who are still largely plodding along and hoping nothing changes. Agents need to build on their strengths, remove their weaknesses, mitigate the threats and take the opportunities that exist.
Reviewing every aspect of your lettings business is vital. Saving money, which could include outsourcing aspects that can be more effectively handled elsewhere, is important as is driving higher revenues from additional products and services (rent guarantee insurance, deposit replacement insurance, buildings and contents insurance, utility and telecoms switching etc.). Most importantly will be demonstrating added value to landlords through achieving the best rents and better yields in order to justify better fees.
Finally, let me let you into a secret about the lettings market. It is changing. It is whether that change is positive or negative that is the question.
I am currently working with many agents on their proposals and should be pleased to discuss, in confidence, how I may help you.
Michael Day MBA FRICS FNAEA