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We give evidence to Welsh Assembly on fees bill

Thursday 05 July 2018

On 5 July, ARLA Propertymark Chief Executive, David Cox presented evidence to the Equality, Local Government and Communities Committee, about the Welsh Government’s plans to ban letting agent fees through the Renting Homes (Fees Etc.) (Wales) Bill.

Chairing the session was John Griffiths AM, with questions put forward by Jenny Rathbone AM, Bethan Sayed AM, Sian Gwenllian AM, David Melding AM, and Gareth Bennet AM. The cross-party committee are currently deliberating the newly introduced Renting Homes (Fees Etc.) (Wales) Bill, with oral evidence sessions currently underway and expected to close on 7 September this year.

Giving evidence alongside David were the National Approved Letting Scheme (NALS); and the Royal Institute of Chartered Surveyors (RICS). ARLA Propertymark also submitted written evidence prior to the session.

The Committee wasted no time in grilling the witnesses with Jenny Rathbone AM opening with a question to the panel: “to what extent do you think fees charged to tenants reflect the costs incurred by letting agents?” David answered the first question stating that, “they do reflect the reasonable costs incurred by agents” and referenced ARLA Propertymark’s research in which the average cost paid by tenants to agents is £202 across England and Wales.

Bethan Sayed AM questioned what the panel believed to be default payments, and whether the proposed Bill was clear in what would entail should a default payment incur. David stated that the Bill was clear in that it detailed these payments would have to be written into a contract and would only occur should a tenant breach it. What he specified as default fees were: lost keys, missed rent payments, and missed contractor and maintenance appointments.

David then went on to say that there are only a “handful” of default payments and the reasoning behind them is, “if the tenant had not have done it, the landlord or agent wouldn’t have incurred a cost.” If these were omitted from the Bill, he expressed that agents would not want to go out of their way to let a tenant into their flat at 2AM, as they wouldn’t be getting paid to do so.

David Cox suggested that to ensure there was clarity concerning what exactly could be charged as a default payment and that a guidance document should be issued by the Welsh Government to prevent them becoming what Jenny Rathbone AM described as a “catch all”. The Assembly Member was referring to rogue landlords and agents using the default payment clause as a means to exercise what would be classed as an ‘prohibited payment’ otherwise. David Cox stated that tenants have been protected by the law from this happening for around thirty years already.

Some areas of the Bill require further clarification. The Chief Executive noted that, “to avoid a PPI moment”, the Welsh Government should elucidate: if Green Deal requirements will be exempted from the ban; whether Change of Sharer and Surrender of Tenancy would be classed as acceptable charges; and will utility payments be included in the list of permitted fees? In February this year, ARLA Propertymark requested the UK Government for assurance on these matters, and they have since been clarified in the Tenant Fees Bill which in England.

ARLA Propertymark believe that the ban on fees will not only make buy-to-let investment less attractive, but also result in landlords taking on the brunt of the costs which 90% of agents think will translate into higher rental costs. Thus, whilst tenants will be alleviated from paying agent fees, they will be likely footing a higher rent bill of on average £103 per year. These figures come from the independent research conducted by Capital Economics on behalf of ARLA Propertymark. 

In the submitted written evidence, ARLA Propertymark made it clear that referencing should be exempt from the proposed ban. Reference checks are imperative in the lettings process, as they ensure that tenants are who they say they are, work where they say they do, and most importantly, their ability to pay the rent. This process is imperative in ensuring a tenant can commit to the financial responsibility, and subsequently safeguarding them from potentially becoming homeless.

A ban on fees for tenant referencing could make private rental very difficult for those on low incomes or with poor credit ratings, something arguably undesirable in a time where housing stock is low. The consequence of such, will reduce competition in the market and many agents will become selective about what tenants they choose, depending on what involves more work for the agents, and weighing up the cost of doing so.

The Committee took a third evidence session after the close of the meeting with representatives from the Residential Landlords Association (RLA) and the National Landlords Association (NLA). They will meet with further groups before closing the evidence sessions, consideration of the key issues arising will begin on 19 September 2018.

Watch the session here.