Who will look after Oxford tenants’ interests after the tenant fee ban?

As is well known to regular readers, I am opposed to the government’s plans to interfere in the private rented sector by introducing a ban on fees charged by letting agents to prospective tenants.  Earlier this week, I attended the Association of Residential Letting Agents (ARLA) annual conference.  During a moderated debate, Baroness Hayter of Kentish Town (a Labour peer) expressed the view that it was inappropriate for letting agents to act for both their landlord clients and their prospective tenants.  She made comparison with the legal profession to illustrate her point.

When challenged by the question who will act for the tenants, the Baroness stated that they could act for themselves.  A response, which demonstrated how removed she has become from the realities of the private rented sector.

In Oxford, like many other University cities, tenants for private rented homes are drawn from a wide spectrum of socio-economic background, nationality, age and, experience.  Many are new to renting, and don’t properly understand the law, their obligations, the landlord’s obligations and how to ensure that they minimise the likelihood of deposit deductions at the end of their tenancy through their actions throughout the tenancy period.  Many have limited financial means, and many have guarantors who ultimately bear the financial responsibility for their tenancy.  Many guarantors do not understand their own risk and how that risk can be mitigated by the tenant’s action during a tenancy.

Good letting agents recognise that the more they help prospective and current tenants to recognise their obligations to look after the property, being attentive to routine matters such as ventilation, cleaning, refuse management and general condition, the more they are acting to protect themselves financially.  This advice is reinforced during a tenancy via regular property inspections identifying actions that if taken now, to avoid them worsening and resulting in damage. Such agents also have an obligation to advise prospective tenants prior to the start of their tenancy to ensure that they request any specific furniture or provision they require to be made by the landlord as a condition of signing an assured short-term tenancy agreement, and to ensure that the landlord specifically commits to such provision prior to them signing.  Good agents will assist tenants to understand the deposit protection and deposit return process, detailing the factors that can result in deposit retentions, so tenants are equipped with the facts they need before they are committed to a contract.  All landlords and their agent are obliged to ensure prospective tenants have a right to rent, checking their legal status to reside in the UK and ability to enter into a contract.  And, good agents insist that a tenant can afford the required rent requiring their credit, income and employment status to be confirmed.

So, are these agent activities purely to benefit the landlord?  Or, do they benefit both parties?  It is clear to me that that an agent’s services are of material benefit for both landlord and tenant.  For some tenants, particularly foreign nationals visiting and renting in the UK for the first time, young first-time renters and young families needing to stretch themselves to accommodate growing families, the agent’s services can be of particular value.

So, if as Baroness Hayter suggests, letting agents should act purely for the landlord, who will act for the tenant?  Will tenants see the value to taking separate advice?  Will they be able to afford to pay for 3^rd party advice? And, will agent services change subtly over-time, becoming less consensual and a little more adversarial?

Will more landlords choose to skimp on affordability checks due to the cost transferring to them?  If yes, it seems likely that both landlords and tenants will suffer as more tenants over-stretch themselves and struggle to pay rent.

Of course, there is no firm answer to these questions, but my own experience suggests that prospective tenants will not pay for advice from a 3^rd party.  Whilst good landlords and their agents will recognise the value of the services provided to tenants, some will no longer recognise the importance of tenants understanding their obligations and being well-informed of the risks involved prior to entering a tenancy agreement.  If I am correct, there will be an increase in arrears, repossessions, and deposit disputes/retentions, which will far outweigh the financial impact of fees for tenants.