Blimey we didn't see that coming - Part 3

Blimey I didn’t see that coming - Part 3

Every November the Chancellor stands up and makes his Autumn statement and for the last three years he has pulled a “rabbit out of the hat” with regards to private renting and buy to let. 

In 2014 it was the change in Stamp Duty.

In 2015 it was the increase in stamp duty for second homes and the change in the tax regime for buy to let properties.

And yesterday it was the upcoming ban on upfront fees charged to tenants, which will be implemented “as soon as possible.” Chancellor Phillip Hammond said “Landlords appoint letting agents and landlords should meet their fees”.

And so for the third time in as many years I say “Blimey I didn’t see that coming”.

Depending on who you speak to this is either “The end of the world as we know it” or “About time those greedy b*****ds got hit where it hurts.”   As usual I believe the truth is somewhere in between. 

Let me put my cards on the table. We charge tenants a fee. Currently we charge tenants a fixed fee of 35% of a full month’s rent plus VAT.  There are no other charges AT ALL.  I make no apology for charging these fees, and this blog is not about justifying our fees.  It is about looking to the future.

The chancellor’s statement was vague, there was no timescale other than his wish to act as soon as possible.  This means there will be a consultation period, I am assuming there will be a white paper and it will need to go through all the stages of both houses and then and only then will it come onto the statute books.  My guess is that it will be late 2017/early 2018 before this becomes law, and that assumes that there won’t be a snap election between now and then. 

So what is going to happen?  The short answer is that no-one seems to know for sure.  Most experts are predicting a spike in landlord fees as agents look to landlords to make up the shortfall in income.  The theory is that landlords will in turn increase rents to cover their extra costs, so the tenant will still pay fees but through his or her rent.  That will work in areas where demand outstrips supply, but if supply outstrips demand, it is likely landlords will have to take this on the chin.

Other people say that as this is a free market this will mean landlords can shop around to find the lowest fees and use that agent, thereby forcing other agents to lower their prices or go out of business.  This is true up to a point, but history shows that a race to the lowest price results in poor service and rogue traders joining the market to make a quick buck.

We at Accommodation Unlimited are taking a wait and see attitude on this.  Until we know the full details we cannot make any decisions.  However, we see this as an opportunity to enter into a conversation with you our clients to find out what you want from a letting agency, what you want us to do, how you see the letting industry moving forward, and most importantly what you are and aren’t prepared to pay for.