When the Tenant Fee Ban comes into effect on 1st June 2019, the cost to letting agents is estimated to be £157.1m in the first year - or about 22% of an agency’s annual revenue. Additionally, with an increasing number of renters coming into the market, the impacts could be even greater than originally expected. As the date of the ban approaches, agents need to be reviewing their processes and systems whilst thinking about ways to recoup the lost revenue.
Hannah Bookham, owner and director at MK Estates in Bournemouth, believes the Tenant Fee Ban is one of the biggest challenges facing the industry today. She argues the result will be a decrease in independent agencies throughout the UK, but it will also contribute to building a stronger community of fair and responsible agents:
“People don’t understand the value of an agent in the transaction and we do incur costs in putting tenants in properties, such as Rightmove subscriptions, referencing, viewings and admin. With the ban coming into effect, we need to look at how we can best spread the costs evenly and in the most fair way.”
Hannah thinks agents will need to look for alternative sources of revenue, and predicts landlords might have to incur many of the costs resulting from the Tenant Fee Ban. Ultimately, rents might need to start increasing - although this isn’t the intended outcome of the fee ban, she notes. But finding other revenue streams could mitigate the need to increase rents, as well as allowing agencies to provide their landlords and tenants with better services.
Daniel Otton, owner and director at Buttercross Estates in Newark, believes the Tenant Fee Ban will hit agencies that have used high and unfair tenant fees to compensate for lower management fees for landlords the hardest.
“As a smaller agency it allows us to operate on a more even playing field and let the value we provide to landlords shine through. We see this as an opportunity to grow and continue delivering our service.”
With additional legislation such as changes to Mortgage Interest Relief and Stamp Duty for second homes, other agents are suggesting some landlords are finding the industry increasingly unaffordable or no longer as profitable. Jamie Evans, Lettings Manager at Billingham Taylor in Dudley, argues that new legislation is driving a lack of stock, which means it’s essential to ensure agents are retaining their landlords - and acquiring new landlords through referrals - by providing value and great customer service:
“It’s important that we maintain the customer service we offer to our landlords. We keep in contact with our landlords to keep them updated on the local market, legislation changes and so on - and ultimately, this service will help us to grow in the next 12 months with the majority of our new lettings business coming now from recommendations.”