Fees ban: Agents should acknowledge government advice to consider business models

Letting agents should heed the government’s suggestion to ‘consider their business models’ in preparation for the upcoming ban on up-front fees, a service provider to the property industry has urged.

As part of the draft Tenant Fees Bill, upfront fees charged to tenants by letting agents will be outlawed by April 2019 at the earliest.


The ban is here to stay

The government’s comments came in response to an online petition which called for a cap on fees instead of a ban.

The petition reached 10,000 signatures and therefore succeeded in forcing an official response to the effect that agents ‘will need to consider their business models’.

Rental payment automation provider PayProp has responded by reminding agents that they can minimise the impact of the ban by streamlining their processes and implementing alternative revenue streams.

Neil Cobbold, chief operating officer of PayProp in the UK, comments:

“We agree wholeheartedly with the government’s comments. Given the upward pressure on fees charged to landlords, agents will need to focus on streamlining their businesses.”

“Not only can streamlining help agents to replace lost revenue, a slicker business model which embraces technology will improve an agent’s landlord proposition.”

“Agents should also consider automation and how it could increase their cash flow, save them time and improve their client retention rates,” he adds.


The road ahead is clear

Cobbold says the government’s comments reinforce its preference for an outright ban, not a fees cap, because that would only encourage agents to increase other fees. A ban is also easier for consumers to understand.

“We also take note of the confirmation that the ban will be introduced in April 2019 at the earliest. Anyone who has had any doubts as to the form and time scale of the ban should now have a clearer picture of the situation and recognise they need to work out how to mitigate its effect.”

Nevertheless, Cobbold says, administering the ban won’t all be plain sailing.

Recently, the Ministry of Housing, Communities & Local Government has been running a Select Committee for MPs to analyse the impact of the proposed ban and weigh up whether it achieves the government’s aim of creating a ‘fairer, more competitive and more affordable lettings market’.

A number of industry players – including the Residential Landlords Association and Trading Standards – have given evidence.

In its response, Trading Standards said fines for those not complying with the ban should be higher, or it won’t pay for itself.

Alison Farr, lead officer at the Chartered Trading Standards Institute, said the proposed fines – £5,000 for a first offence and up to £30,000 for subsequent offences – would not ‘cover the cost of the work’ needed to enforce the ban. She also said Trading Standards carries out a lot of ‘preventative work’ which is rarely accounted for.

“The comments made by Trading Standards show that full and effective enforcement of the fees ban could be a significant problem,” says Cobbold.

“A ban that is not enforced is pointless and Trading Standards needs to have confidence that it has the necessary powers and resources to properly enforce the legislation, ensuring that non-complying agents don’t reoffend.”


Prepare to prosper

“Despite the challenges, the upcoming fees ban is a certainty and will represent a significant shift for the industry. But that’s not to say the best agents who embrace change can’t continue to prosper in a lettings sector which continues to grow rapidly,” Cobbold concludes.

PayProp is a bank-integrated automated payment platform operating in the UK property market. Since launching in the UK in 2015, the platform has grown to manage the payments on more than 20,000 tenancies.

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