One of Scotland’s leading housing lawyers has predicted that the coming months may see significant consolidation amongst property agents operating in the £2 billion a year private rental sector in Scotland.
Paul Harper, Partner at award-winning law firm Lindsays, believes changes to legislation now taking effect have already seen some agents go to the wall – and more are likely to follow.
Hundreds of thousands of people in Scotland live in private rented accommodation.
He said: “The introduction of the Tenancy Deposit Scheme, and the recent consultation aimed at clarifying the legal position on agents charging tenants fees or premiums are both set to have an enormous impact on the cash-flow of property agencies.
“We have already seen at least three go under and the belief has to be that more will follow. What we are now seeing as a trend is that the bigger, better-run agencies will continue to survive and thrive. We are seeing some of them pick up business from the smaller agencies, and we are also seeing investment funds specialising in this sector begin to buy up portfolios of agencies and individual landlord portfolios.”
Scottish Government estimates put the number of private rental homes in Scotland at around 273,000. With an average rental being achieved of £656, according to private flat marketing website CityLets, that means revenues of £2,149,056,000 per annum in Scotland.
Paul added: “While definitive statistics regarding the number of people employed in this sector are difficult to pin down, clearly a sector generating almost £2.15 billion per annum is going to support thousands of people in work, either directly or indirectly. Not only landlords, and property agencies, but also the many professionals involved in the sector, tradesmen, cleaners and so on.
“The impact of the consolidation on employment will be impossible to define with any certainty, but it is bound to be felt.”
The Tenancy Deposit Scheme (TDS) means landlords, or their agents, now must pay any deposit taken from tenants into an approved scheme rather than holding into the cash themselves. TDS became operational on July 2nd 2012 and landlords and agents are reminded that it applies to both new and existing tenancies.
Paul added: “Many letting agencies and landlords – some of whom may have viewed the deposits as part of turnover and/or working capital – are having to not only change the way they operate, but also find what may be substantial sums of money relatively quickly.
“For some letting agencies with hundreds of tenancies on their books, that could mean finding six figure sums.”
In addition, the Scottish Government has beenconsulting on a range of other issues affecting the sectorin rencent months, such as clarifying what fees agents may, or may not, charge to tenants. It is expected to clarify many issues around the charging of fees for things like tenant credit checks.
Paul said: “Some agencies charge for a variety of things, with fees typically ranging from £50 to £175. The consultation may take a ban-all approach, and will then discuss over a longer timescale, any potential exceptions to this. Again, this will have a big impact on cash flow for many agencies.
“Having said this, we fully expect the many well-run, highly professional property agencies to continue to perform well in this growing sector.
“This is despite an undoubted trend towards greater regulation of the sector, and – we think inevitably –we will see a move towards licensing or registration of letting agents in the way that already applies to landlords and factors.”
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