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Labour steps into Agency tenant fee debate - Why are Agents charges so high?

In a  controversial public meeting will be held where lettings agents are expected to “explain themselves” for charging fees to tenants has been given added spice by comments from the Labour party.  The Bristol group ACORN - Association of Community Organisations for Reform Now - is holding a meeting where at least two local lettings agents say they will respond to the group’s call for them to “explain themselves” and why they charge fees to tenants.  

The pressure group has already personally visited many other agents in the city as part of a campaign to scrap what it calls “extortionate and unjustifiable” tenancy fees, to secure the introduction of 12-month fixed term tenancy agreements, and to move towards five year fixed term tenancies.   Now Labour has backed the campaign. Thangam Debbonaire, the party's parliamentary candidate for Bristol West at next year’s general election, has waded in.   "Only in the rental market are both sides of the transaction charged – if you buy a house, you don't pay the estate agent anything. These fees are not one offs. It seems to be the norm that if you want to renew your lease at the end of its term, even though this is good for the landlord, you get whacked with another fee" she says.  

The two agents attending the meeting are Besley Hill and Piper Properties.  A local Bristol newspaper claims that on average tenants in the city pay £355 to their lettings agents every time they move, with some paying as much as £500. It claims 54 per cent of tenants surveyed say they face financial difficulties because of the fees.  

Doncaster Council threatens landlords with £20k fines in Licencing Scheme

Another local authority has set out its proposals to introduce selective landlord licensing, with hefty £20,000 fines for those who do not fall into line.  Doncaster council is now consulting on the proposals for licensing in the Hexthorpe area because of alleged tenancy management and anti- social behaviour problems.  The consultation started this week and will take 12 weeks. If it is approved - and in most recent cases involving local authorities the original proposals have been rubber-stamped after consultation - the new regime will begin in December.  

Landlords or their agents will have to apply for a five year licence costing £500 for each rented property. Any landlord letting property without a licence would be prosecuted with fines of up to £20,000.  

The council argues that licensing schemes offer benefits for tenants in particular - for example, landlords have to provide a tenancy agreement, maintain health and safety measures and commission regular gas and electric checks. 

Doncaster also wants the licence conditions to specify the quality and speed of property repairs, maximum numbers of occupiers, security, management and even the external appearance of the property. As has become the norm with councils where licensing already exists, landlords face fines of up to £5,000 for each condition which is not met. 

Landlords are you aware of The Energy Act 2011 and its Implications for Landlords from 2018?

Are you aware of the changes in legislation affecting the letting of residential properties? Did you know that from 2018, it will be illegal to let properties which are deemed energy inefficient? If so, are you planning ahead to ensure that any necessary work is done during a break between tenancies? 

If you’re not yet fully up to speed, the good news is that there are various Government initiatives to help from both a practical and financial point of view, but it’s worth starting to think about it now.

From April 2018, under the Energy Act 2011, it will be illegal to rent out property where a minimum energy efficiency standard has not been achieved. This is thought likely to be fixed at an Energy Performance Certificate (EPC) rating of E, although it is yet to be confirmed.  Therefore any F and G rated assets that you own will need substantial improvements or face ‘obsolescence’ – that is, they will not only be illegal to let, but extremely difficult to sell. 

The good news is that we’re expecting secondary legislation which will state that the improvements required must not entail upfront costs to the landlord. This is expected to mean that only improvements that can be funded through the Green Deal and any available ECO funding, would be required.

The Green Deal was introduced in January 2013 to enable the cost of energy efficiency improvements such as loft and wall insulation, to be paid through a loan attached to the property’s energy bills and repaid over a period of up to 25 years. Under the terms of the Green Deal, an accredited Green Deal assessor must visit the property and draw up a plan showing the possible energy efficient improvements, and the cost and potential energy savings. Improvements must then be carried out by accredited Green Deal providers. Liability for paying the supplement remains with the property, so if you sell the property, the next owner is liable for paying the supplement (unless the right to repay the loan early is exercised).

Green Deal funding is only available if the anticipated energy savings throughout the lifetime of the improvement (up to 25 years) exceed the initial cost of making the improvement, but this can be discussed with your Green Deal assessor. 

There’s no doubt that the Energy Act poses a significant change to the property investment market, but with the right advice and some careful planning, landlords have the opportunity to create a much more sustainable product in a way that is financially manageable. 

Below is a list of procedures landlords can carry out to raise their energy rating:

• Boiler upgrades
• Change light fittings to LED or CFL technology
• Introduce more sophisticated controls on heating, lighting, air conditioning 
• Upgrade insulation to roof and cavity walls.  
• Retrofit external insulation / cladding 
• Replace single glazed windows or apply secondary glazing
• Install photovoltaic or solar thermal panels
• Install air sourced heat pumps
• Address any draughts 
• Install a weather compensation system (boilers are not active when external temperatures are above 15ºC)
• Install motion sensors and adjusting timings on existing sensors so that lights switch off promptly
• Reduce thermostat deadbands to within  + 2ºC or - 2ºC to prevent heating and cooling working simultaneously
• Carry out 24-hour lighting audits where energy efficient light bulbs have been installed
• Install software that monitors computer use and can switches computers off when not in use
• Metering and energy-management – gain data on where savings can be achieved and evaluate the effectiveness of initiatives
The council insists the measure will help landlords, too, by reducing voids and tenant turnover, encouraging a higher standard of property and improving the reputation of the sector and the area.
There has been a long-running debate within the industry about licensing, with almost all agents and landlords suggesting that the system as applied currently does little but raise funds for councils and government. Some industry bodies advocate accreditation as a more effective alternative.
Rents rising four times faster than income

Rents are rising four times faster than household income according to Homelet. The insurance provider, which compiles a lettings index, says the average private rent has risen 7.5 per cent in the last year while national average earnings are up 1.7 per cent.  The average UK rent now stands at £846 per month. The largest rent increases were seen in East Anglia and Greater London, where rents were up by 10.7 and 9.4 per cent respectively over the year.  Rent rises outstripped increases in average national earnings in eight out of 12 regions of the country.  The average tenant signing a rental agreement in May this year had an income that was 7.2 per cent higher than those who signed agreements in the same month of last year.  These results suggest that a new, more affluent type of tenant – possibly people for whom house price rises and mortgage market tightening have made purchasing more difficult – is now looking for rental property.

Is technology changing the rental market?

Before the advent of the internet, the UK rental market was a knowledge black hole with most landlords and tenants largely unaware of how their local or the national market played out. 

The digital revolution has brought both better understanding and transparency to lettings for landlords and tenants, mainly via data created by property portals such as Rightmove and Zoopla.


So what can we know that was hidden before? For starters, the size of the lettings industry and the opportunity it presents. Data from online portals and government research shows that last year there were some 3.88 million rental properties in the UK owned by 1.88 million landlords – the average therefore being just over two properties per landlord – and that 1.8 million homes change tenants each year, a staggering turnover rate considering the state of the market.

The speed of the market is also increasing, a change brought about primarily by online listings but also the chronic undersupply of properties to rent in many areas. 

A significant driver of this change has been the ‘property alert’, a key tool offered by property portals to tenants seeking a home to let. This helps funnel many more enquiries about a property to landlords than would before have been the case and, at a conservative estimate, the leading portals together now generate some 1.5 million rental enquiries a year. 

This is boosted by the increasing number of tenants using the internet to search for a home; during the late 1990s and early 2000s some 80% of tenants started their search online and combined that with traditional channels such as local newspapers. Now 92% of tenants ONLY search online for their next rental property.

Properties are also renting faster than before. While the property sales market has seen the average number of days to sell reach record highs as recently as last year, void periods for landlords are at their lowest for 12 months, research by the National Association of Landlords has shown, and tales of properties renting in a matter of hours – particularly in London – are increasing in frequency.

But it's not all about figures. Most websites can also tell who is using their service and this is particularly true for property portals, often requiring users to register their details in order to make an enquiry.  We can tell that more than a third of those searching for a rental property are families, and that 30% of all tenant enquiries are made outside of traditional opening hours.

This faster, more dynamic rental market is also helping drive up rents. According to the government’s own data, rental price rises outperformed inflation comprehensively during both 2012 and 2013 and more in other areas of the UK. The hand of technology in helping the market move faster and more transparently in the future can only increase this trend.