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Chancellor declares ban on ‘extortionate’ letting fees

Mike Wakeford

The autumn statement addressed the current economic forecasts and projections, provided by the Office for Budget Responsibility (OBR).

Perhaps the biggest change to come our way in relation to the property market will be the abolishment of letting agency fees charged to tenants in England.
This means that the government have made a very abrupt U turn as the Prime Minister Theresa May had previously disagreed with the ban on the fees, with a worry that landlords would instead push up rental prices even further.

With the idea in full swing in Scotland and working successfully, Chancellor Phillip Hammond stated that “estate agents will be banned from charging fees to tenants, in hope that it will cut off a huge amount of revenue that has continued to rise in recent years.” The fees that will be abolished will include administration charges, which have managed to slowly creep in for easy, less time consuming activities such as credit checking references, credit history, creating contracts, renewing contracts and ending contracts.

During his announcements in parliament today he stated that these charges were ‘wrong’ and that landlords should be responsible for these fees when using a letting agency, not the tenants. With rental properties on the rise, Hammond hopes to save 4.3m households hundreds of pounds. It is no surprise that many landlords will now begin to look for ways to combat the abolition of these fees and as Theresa May stated when first disagreeing with the banning of the fees, landlords have began discussing how they plan to make their rent payments higher to cover the costs that they will now be liable for.

However, a spokesman for ETX Capital, Niel Wilson stated that the abolishment of the fees could in fact enhance competition in areas where renting is favourable. "Passing on the cost to landlords could drive down fees by improving competition, although estate agents claim they make no money from fees."

Social media has of course played its part of being the portal of debate, on whether this is the correct move to make. Some argue that these changes are unfair and that it is the “government turning on the private sector, in the absence of the government’s action to be able to build affordable homes for those renting in the social housing sector and in turn this has led to private landlords having to fill the gap on their behalf.”

The change in policy is designed to help ‘ordinary working class people’ avoid additional costs when renting.
Foxtons share prices plummeted by 13% in one hour after the Government scrapped letting fees. Countrywide, the UK’s largest estate agents, was also hit with shares dropping by 7%.