GOVERNMENT BAN ON TENANT FEES... PART TWO

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The timing of the ban on tenant fees is particularly awkward for lettings professionals. The reality of the property industry is that it is an industry built on volume – it needs a steady throughput of new tenancies to keep the money coming in and keep the bills paid! The current slowdown in the property market (the slowing pace of rent increases and the slow-down in UK house price growth) are already squeezing margins for almost all estate agents.

That’s why tenant fees are so valuable. In an ironic twist, many were introduced by struggling agents a decade ago during the property crash of 2008/2009 as a way to bring much needed ‘bread and butter’ income into struggling businesses; now, once again, they’re a crucial revenue stream.

Once the Bill becomes law, essentially estate agents will face a tough choice – they will either have to take the hit themselves and lose an essential revenue stream or find a way of replacing the lost income, possibly by charging Landlords more for the work they do. Neither is a particularly attractive proposition, as the sluggish housing market means there is intense competition for Landlords’ business and raising fees more than a rival may raise theirs could lose an Agent some valuable clients.

The pressure will be particularly acute on the High Street where agents have higher overheads than their online rivals. There are still around 16,000 High Street Estate Agents’ branches around the country, many small, local single-office businesses who may be forced to merge with rivals to survive. Even the bigger corporate agents, such as the large chains that are listed on the stock market, will face pressure from shareholders to devise strategies to protect their profit margins.

Realistically in the longer term agents will have little choice but to find ever more imaginative ways to recoup their lost income. Charging Landlords’ a higher fee to find tenants and manage their properties is an obvious starting point, but maybe the days of Agents offering sellers a ‘no sale, no fee’ option to sell their property will be numbered on the basis that no business can work entirely for nothing and survive for very long……!

Thank you for reading,

Sue Iles