Scottish decision to ban tenancy fees criticised by landlords

THE news that all tenancy fees have been outlawed in Scotland has prompted outrage in the lettings industry.

Jonathan Morgan, managing director of Leeds-based Morgans City Living, says: “If there are no fees agents won’t be able to trade. What’s needed isn’t an outright ban on fees charged to tenants but simply a reasonable and transparent fee structure that tenants are made fully aware of before they sign for or move into a property.

“Any agent worth its salt would sign up to a scheme where they provide tenants with a breakdown of charges before a tenant has to commit to anything. To ban all lettings fees is crazy, it’s like saying a mortgage broker can’t charge a fee for finding a mortgage.”

Shelter’s recent YouGov survey said 23 per cent of tenants felt “ripped off” by letting agents but Morgan believes that by introducing an agreement that clearly shows what fees are charged, any mistrust would be eradicated.

Jonathan says: “Of course it’s essential that fees are fair. With such a booming lettings market and some unscrupulous agents entering the market to take of advantage of this, tenants must feel safe and secure and landlords should also have a clear understanding of what their agent is charging their tenant.

“To talk of outlawing all charges is just not practical as there are significant cost implications for operating a business in the first place, not to mention carrying out viewings, processing applications and general administration that have to be met.”

This sentiment is echoed by Jane Ingram, president of the Association of Residential Letting Agents. She says: “It is important to bear in mind that a professional lettings service cannot be provided to either a landlord or a tenant at low cost. However, both parties should be aware of their costs and feel that they have had a professional service, and should have somewhere to seek redress if they feel otherwise.”

Shelter has also called for a new five-year private rental contract to be introduced to give people greater stability. They say this would help tenants put down roots and give landlords greater certainty over returns. The suggestion is that rents would rise in line with inflation each year.

Jonathan Morgan isn’t so sure this is a good idea: “The premise of a five-year contract with the ability to give notice on either side is not sound. Currently the average tenancy length in our city and the North Leeds area is around eight to 10 months and this is a reflection of the lifestyle of the vast majority of our client group. They rent for a shorter period because they actually want short-term commitment and flexibility and have no interest in being committed for a longer term. If it’s the case that renting is a stepping stone for most people, and evidence suggests that this is very much the case, then it follows that a five-year tenancy will only appeal to those who do not envisage buying in the next five years.”

He believes that the European model of renting won’t catch on in Britain as many forecasters have predicted.

“In Germany, the most prorental market in the EU, around 54 per cent of people rent their home but the cost of buying a property has always been much higher, with average deposits at around 40 per cent. In simple terms, the buying public have always had to have significant equity. This is not what the British public have become used to, and whilst it might take a while, the consensus is that loan to value requirements will fall over time back towards levels at which the volume of transactions will once more increase.”

He adds that reluctant landlords are filling a gap in the rentals market by letting a property they would rather sell, which means that a lot of lets will be released for sale as the market recovers.

More at Jonathan Morgan’s blog at www.cityliving.co.uk or www.cityliving.co.uk/blog/