Letting agents working in Scotland’s £2 billion a year private rental sector were today warned of major changes to the way they can do business.
One of Scotland’s leading housing lawyers, Paul Harper of Lindsays, was speaking following today’s announcement by the Scottish Government that the existing law will be clarified so that private letting agents and landlords will not be able to charge any upfront fees to tenants.
Hundreds of thousands of people in Scotland live in private rented accommodation.
The Scottish Government today delivered its awaited clarification on charging tenants upfront fees for things like credit checks. Housing Minister Keith Brown confirmed the law will be clarified to ensure that any charges, other than rent or deposits, will be deemed illegal in future.
The new legal mechanisms will be in place from later this year, but agents are already being warned not to pursue premiums and fees.
Paul Harper said: “Today’s clarification, coupled with the earlier announcement and introduction of the Tenancy Deposit Scheme, will have an impact on the cash-flow of property agencies. Those which have previously charged tenants fees, for example to meet the cost of tenant credit checks, or inventory fees, will no longer be able to do so. I also anticipate that this decision will once again encourage tenants to pursue sums they have already paid.”
“We would strongly recommend that agents and landlords take immediate heed, and accept this clarification and act accordingly.”
Scottish Government estimates put the number of private rental homes in Scotland at around 273,000. With an average rental being achieved of £670 in 2011 according to Lettingweb, that means revenues of £2,194 million per annum in Scotland.
The Tenancy Deposit Scheme means landlords or their agents are compelled to pay any deposit taken from tenants into an approved scheme rather than holding onto the cash themselves. TDS went live in July2012 and applies to all new tenancies and existing tenancies.
Paul added “All of the above changes mean that letting agents and landlords may need to plan income and revenue streams in a different way than they may have done before – we may see letting agents review their structure of charges to landlords, following the announcement on premiums. The cost has to be absorbed somewhere, and we may also see increases in rent.”
“There is 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.”