Show caption Letting agents Simon Clarke told landlords to increase future rents by £20 a month. Photograph: Graeme Robertson/The Guardian Renting property Letting fees ban: agents urge landlords to increase rents The government has banned agencies from ripping off tenants – but there is evidence that rents are rising to offset the losses Miles Brignall Sat 15 Jun 2019 07.00 BST Share on Facebook

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There were warnings that this month’s ban on rip-off tenant fees would result in rents being pushed up – and now Guardian Money can reveal this is already starting to happen.

Just two weeks after the ban came into force, a north London lettings agent has started telling its landlords to raise all future rents by £20 a month to offset the new costs they face. And it is unlikely to be alone in proposing such a measure.

The move, which was this week branded by one landlord as “not in the spirit of the law”, had been predicted by some commentators, though few thought it would happen this quickly.

Letting agent body Arla Propertymark warned in May that rents would rise by £103 a year as agents and landlords sought to recoup lost revenue. It now expects other agents to quickly follow suit, it said this week.

At the start of June the government outlawed the £300-plus admin fees, the £100 credit-check fees and a host of often ludicrous charges that had become the bane of tenants’ lives. They could easily add £600-£800 to the upfront cost of renting a property. While tenant groups celebrated the ban, it was accompanied by threats from the property industry that rents would have to rise.

It emerged this week that award-winning London letting agent Simon Clarke has been writing to its landlords with the increased rent proposal. The company, which has been in business since 1991 and has offices in Finchley and Whetstone, is to start charging landlords £240 for credit and other checks – on top of its existing fees. Prior to the ban, it charged tenants £432 for the same service. An online tenant credit check can be done for about £20.

The letter seen by Money states: “Assuming you would like us to continue to fully reference and credit check prospective new tenants as and when your property becomes available, we need to inform you that an additional admin charge of £200 plus VAT known as a ‘tenancy set-up fee’ will be levied … and in addition to the letting fee. This is to cover the cost of this essential referencing service moving forward and shall include the right to rent immigration checks.”

The company, which already charges landlords a 9.6% lettings fee, with a further 6% if they want the let managed, goes on to say: “We are very aware this is a cost which you perhaps have not accounted for and therefore what we propose is a small increase in the monthly rental figure to absorb the effects of this charge. This means increasing your rent by £20 per month, and this is something we will do before we list the property ‘to let’.”

The landlord who contacted us to reveal Simon Clarke’s letter says he will resist the agent’s move to increase the rent. “I don’t think this is in the spirit of the legislation. There is little transparency in the fees, and I have little idea of how much the letting agents actually pay for credit checks, referencing etc. I’d rather that I, as a landlord, bear the brunt of these charges, not the tenant,” he says.

A spokesperson for Simon Clarke told Money: “With the introduction of the tenant fees ban, we have had to pass on our costs for setting up a tenancy. In this time of increased regulation, particularly the recent rises in landlord taxation, we have advised our clients on how to ensure they can still cover the costs of their rental properties.”

The agent also asked Arla chief executive David Cox to speak to us. “When the ban came in, we warned that rents would rise on average by £103 a year. What we have seen this week is what we predicted would happen … This is set to happen across the board,” he said.

Cox pointed to research undertaken for Arla by the consultancy Capital Economics that revealed the fees ban is set to cost letting agents £200m a year, and landlords £300m. It also claimed that 4,000 letting agent jobs could be lost.

Dan Wilson Craw, director at campaign group Generation Rent, says it is interesting that this agent is not attempting to pass on to landlords the full £432 sum it used to charge tenants.

“Existing tenants aren’t affected – rightly, because there are no costs involved when there’s no change to whose name is on the contract,” he says. “As for the attempt to increase rent by £20 a month, whether this is possible depends entirely on the wider market – a shortage of homes sees rents go up anyway, but if the landlord is competing with newly built flats, they might struggle to get new tenants in at the higher rent.”

In January the Guardian reported that rents across Britain fell in 2018 for the first time in a decade, after years of inflation-busting rises. Figures from the Deposit Protection Service – a government-backed group that supervises tenancy deposits – showed that the average rent fell by £9 – from £774 in 2017 to £765.