The Welsh Government has commissioned a report to broaden its understanding of the fees charged by agents to tenants in Wales. The Government wishes to understand what fees and charges are applied, at what level and the potential impact on agents, landlords and agents, if the fees and charges were banned.
Some of the key findings of the study are:
- there are approximately 400-700 agents currently operating in Wales;
- 29% of the private property stock is managed by agents;
- 7% of the stock is let by agents but subsequently managed by landlords.
An online survey was carried out and of the 168 letting agents that took part 46% were part of an estate business and 44% were dedicated letting and management agencies.
Charges and fees
Of the 168 letting agents 84% reported charging a set-up fee averaging £178 per tenancy. It is estimated from the survey data that 19% of letting agency income in Wales comes from fees paid by tenants which is around some £10m per annum. Two thirds of the agents surveyed charge a fixed fee per tenant/tenancy but did not break down what the fee covered suggesting that a “menu” of charges is confusing. Renewal fees were also applied by 37% of agents ranging from £15 to £250. Agents were also asking for holding deposits or using the fees charged at the outset to ensure a commitment from tenants. The survey suggested that Landlords did not charge a holding deposit or set up fee.
Reasons for fees
The agents surveyed estimated that a new tenancy typically took 14 hours to set up and incurred third party costs of approximately £92. Agents argue that work such as drawing up the inventory and a fair tenancy agreement incurred further costs. Agents also suggested that it was a competitive market for landlords and that they needed to keep costs down for them by charging fees to tenants.
Impact of a ban on fees
76% of the agents surveyed suggested that a ban on fees would see profits fall and that costs are therefore likely to be passed on to the landlords. Of the landlords surveyed 82% said that they would increase rents if their agency fees were increased. However, tenant’s groups are still in favour of a ban on fees even if rents are increased because they suggest that paying rent is easier for tenants to cope with financially.
Conclusion
The report therefore recommends a ban on fees similar to that in Scotland. The survey lists a number of recommendations which we will address in a separate post later this week.
