Gathering storm of fees ban in Scotland – and a warning to English government as Scots landlords ‘flee the market’
23 Oct 2017
Five years after agents’ fees charged to tenants were formally banned by the Scottish government, the effects continue not just to reverberate but to worsen.
The claim comes from Tony Williams, managing director of referencing firm UKtenant data.
He has been researching the Scottish market by engaging directly with letting agents, to see if he can establish any likely pattern for what could happen in England after tenancy fees are banned.
In England, there is still no clear timetable – despite the ban having been announced almost a year ago in the Autumn Statement, when Chancellor Philip Hammond said the change would be “introduced as soon as possible”. The Government has since repeated its pledge to bring in the ban, with a consultation between April and June this year.
A new inquiry into the lettings agent and leasehold sectors was launched last week, but without any obvious sign of immediate legislation.
Williams, who is based in Preston, said at the weekend that the feedback he has had from agents in Scotland is depressing.
Although ‘premiums’ have been illegal in Scotland since 1984, agents continued to charge some fees and the position was legally clarified in November 2012 as a complete ban.
Williams said: “The loss of fees has had a profound effect on the rental sector in Scotland.
“We are all aware of the obvious fall-out in terms of lost jobs, increased rents and so on, but I simply wasn’t prepared for the level of properties that have been withdrawn from agency management and sold due to the increased fees to landlords.”
He cited the example of one agency in Glasgow which he described as having been “absolutely hammered”.
He said: “I had a particularly depressing conversation with a great client of ours, Core Property, based in Glasgow. Core are a truly professional agency who welcome positive change to the industry.
“However, Carol Brown Blair, a senior manager at the company, said the fee ban has had a really negative affect on the industry and the rental market in Scotland. During our conversation Carol told me she had lost in excess of 100 properties in just 12 months due to landlords selling them and exiting the market completely.”
Williams told EYE that the firm had agreed to be named, such is the strength of the agent’s feeling about the effects of the ban and the message it should send to England.
Williams said: “Initially, the ban in Scotland hit agency revenue resulting in increased fees to landlords and rents rising to mitigate some of these costs, but what’s really interesting is what is happening years down the line post-ban.
“It probably started subtly, with just a small proportion of landlords selling up and getting out.
“Now it is as though there is a ‘bang’ and they are clearing out in droves. Can we blame them? No, not really – property investment in Scotland is simply not a viable proposition any more.”
Williams said: “This is an elephant in the room – and there is a message for the English government.
“Don’t take the rental sector back to the 1970s. Acknowledge the facts and have a more balanced and sensible approach to the issue of fees.
“This isn’t just about agent bashing – it’s about an industry that just can’t afford to contract.”
Shelter, which campaigned for the ban in Scotland, did research in 2013 which claimed that only 2% of landlords had raised their rents because of the ban. Last year, in a blog on its website, Shelter said: “Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research shows that this hasn’t been the case.
“The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK.”
Williams called for Shelter to engage with him to discuss why there was such a disparity between its findings and those of his own firm.
Williams’ remarks follow an article written in EYE by his colleague Mitchell Thomson.
Ian Wilson of The Property Franchise Group has said that Martin & Co franchisees in Scotland actually saw their lettings revenues rise in the year after the ban, but did not deny that costs for landlords have risen. Earlier this year, he said that set-up fees charged to landlords doubled from £200 at the start of the ban to £400, and that rents have risen.
Meanwhile, DCLG is insisting that the ban in England will go ahead.
A spokesperson said: “Our Tenants Fee Bill will be first published in draft to ensure full scrutiny of our proposals by Parliament and stakeholders before introducing the legislation formally. We shall publish the outcome of the public consultation on our proposals shortly.”
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