Tenant Administration Fees - Are they justified?

Ed Miliband and the Labour Party recently announced that if they win the General Election they will introduce a law to stop lettings agents from charging tenants fees for renting property in a bid to provide a fairer deal for tenants.

We thought it would be fair to set the scene as it is now.

At Belvoir Falmouth we charge an upfront administration fee to cover the cost of some of the work we do on the tenant's behalf.  It is kept at a reasonable level and is openly discussed with tenants from the outset.  All our tenant fees are also clearly listed on our website so there is nothing hidden.

I know from personal experience that not charging this fee before referencing can leave you out of pocket when a tenant changes their mind or fails the checks.

Administration fees vary from agency to agency and some do seem very high. There are also agencies who charge tenants fees for other services such as check-in, inventory, deposit registration, check-out and tenancy renewal, all of which can all get expensive.

It's unclear whether these additional charges are included in the Labour Party plans. However, the upfront Tenant Administration Fee definitely is.

So if Labour are successful, how will we make sure that we don't lose money if a prospective tenant - with no financial risk to himself - potentially puts in offers on several properties at the same time, either to hedge his bets or, worst case, in the hope that at least one agent won't reference thoroughly and find out something he wants to hide?

Pass the Administration Fee to the Landlord?

There has been the suggestion that these fees will be passed on to the Landlord instead. And maybe where the administration fee is relatively small that will not cause too much concern.  It is more likely though that a number of things could happen as a result of this action.

- Rent Increases. Landlords may put up their rents to cover their increased charges.  Does this have any benefit for the tenant?

- Self Management. Landlords may choose to do-it-themselves rather than use agents.  Most Landlords who use agents do so because they don't have the time or experience to self-manage.  Electing to do so now could mean falling foul of increasing regulations, leading to potentially bigger costs in the form of fines. Is this the best situation for the tenant?

- Focus on cost. Landlords could look for the cheapest agent. This is so often a false economy particularly with the fines that can be incurred as a result of non-compliance with legislation. Again, is this the best thing for the tenant?

So what is the answer?

The Advertising Standards Authority ruled that agencies have to advertise all non-optional Tenant Fees and to identify and provide information on any optional costs that can not be easily quantified.

Tenants and Landlords can, and should, use this information when selecting which agencies to work with.

We do understand the sentiment behind the proposal and Belvoir is completely in support of a review of the private rental sector, however in this instance the proposal will not have the desired positive outcome for tenants.