Hundreds of letting agents may shut because the l will squeeze profits by reducing revenues by up to a third.
Many feel closing is their only option because they cannot find alternative revenue sources or attract enough new landlords.
The new law – expected to come into force in England next year – is likely to impact letting businesses of all sizes, says a report from buy to let software management firm Fixflo.
“We have known for some time that the Tenant Fees Bill will have a significant effect on letting agencies of all sizes, and this has been borne out by this year’s survey. 49.63 per cent of agents have cited that they will lose 10-30 per cent of their revenue,” says the report.
“This is a major threat for any business, especially small businesses who will often yield a net profit of 10-20 per cent. As highlighted in this report, agents do want to grow to offset this predicted loss, but unless they carefully manage their ability to increase their capacity without substantially increasing their overheads or operating expenditure, the gap between sales and costs will continue to grow.”
The report also highlights the business challenges letting agents expect to face over the next 12 months.
The Tenant Fees Bill is a worry for 41 per cent, while another 32 per cent say they have problems attracting more landlords as clients.
“This is interesting because both answers are actually focused on the same outcome: growth,” said the report.
“For all the talk of the threat of online competitors, this does not seem to be a major concern to most agents as only 8.87 per cent of agents cited threat of competition as a major challenge in the next 12 months.
“While agents this year did not specifically say that they were concerned about the Tenant Fees Bill, the two concerns this year are clearly related to the Bill – it will cost agents revenue and their key concern will naturally be to win as many landlords as they can to offset that financial loss as much as possible.”
Government figures estimate that England has 13,500 letting agents.