Could bans on letting fees see loyal tenants become a thing of the past?

Loyal tenants could soon be a thing of the past, landlords have been warned.

Tenants who stay put are losing out

A leading industry expert claimed tenants who stay in their properties for longer could end up being worse off financially following the announcement of a ban on letting fees.

David Cox, chief executive of the estate agency body Arla Propertymark, said: “Those tenants who move less frequently will be hit the hardest.”

His comments were based on figures that his group published in a report written in conjunction with economists Capital Economics.

The report claimed letting agents would look to recoup their losses stemming from the ban by increasing costs to landlords.

In turn, it believes landlords (41 per cent) will pass on a portion of the inflated costs to tenants.

‘Crowd-pleasing policy’ could have unintended effects

The figures in the report were calculated on the basis that the average tenant fee is £275 a year - money that tenants would now ‘save’ each time they moved home (as they would no longer have to pay the fees to letting agents).

Indeed, if tenants moved every six months in the next 10 years, they could ‘save’ the equivalent of as much as £5,500 following the ban on tenant fees.

Even taking into account a portion of the inflated cost to tenants, those who move every six months gain almost £4,500 in a decade, according to the report.

It compares to losing out by as much as £755 if a tenant remains in a property for 10 years or more (due to missing out on the benefits of not paying tenant fees every time they move).

Mr Cox added: “This is ironic and shows that there will be unintended consequences to what, in effect, is a crowd-pleasing, populist policy.”

The research also highlighted some coping mechanisms that landlords would take following a ban on tenant fees. These include 27 per cent saying they would not buy any more rental properties and 20 per cent saying they would sell some rental properties.

Are you worried about the ban on letting agent fees? Let us know in the comments

Get set with tailored landlord cover

Over 100,000 UK landlord policies, a 9/10 customer rating and claims handled by an award-winning team. Looking to switch or start a new policy? Run a quick landlord insurance quote today.

Start your quote