Letting agent fees are to be banned under proposals set out by the government in a bid to encourage greater competition in the rental sector.
The move has been criticised strongly by the Association of Residential Letting Agents (Arla) which that tenants will end up paying for the changes.
The government's proposals will also ban any letting agent fees being charged to tenants by landlords and other third parties.
It also aims to tackle what it labels 'unfair charges' and to stop agents double charging tenants and property owners for the same service.
Housing minister Gavin Barwell said: "Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.
"Whilst most letting and managing agents provide a decent service, there are those that offer a poor service and engage in unacceptable practices."
The government announcement cited a report from the charity Shelter which found that nearly one in four people in England and Wales feel they have been charged unfair fees by a letting agent.
Fee levels vary considerably and the charity found that one in seven tenants pay more than £500.
The proposals recognise that landlords are being hit with dubious fees and according to Mr Barwell the measures are designed to create a more transparent market place in which landlords can easily shop around for an agent.
David Cox, chief executive at Arla Propertymark, saw the move as counter productive.
Mr Cox said: “Independent analysis launched at Arla Propertymark’s annual conference last week revealed that if an outright ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.
"The decision is a short-term crowd pleaser and we are disappointed that the Department for Communities and Local Government (DCLG) has not considered our proposals in today’s (7 April) consultation."
David Hollingworth, associate director for communications at London & Country Mortgages, saw the risk that consumers would end up paying too, but thought letting agents would also share some of the pain.
"On the one hand everyone would want to avoid the unnecessary charging of fees by those who are less scrupulous, but there is a risk that you shift the cost onto the rental fee," he said.
Landlords, he added, were not in a mood to take on extra costs, after seeing tax relief cut and higher stamp duty charges.
"Landlords are feeling a bit bruised from those changes," he said. "There will have to be some competition from letting agents for landlords, because there will be fewer coming to market and therefore the competition may mean it is not a straight hand across of costs to landlords who will then up rents."
david.rowley@ft.com
