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New letting agents laws needed

Emma Lunn
by Lovemoney Staff Emma Lunn on 19 February 2013  |  Comments 5 comments

New laws should be introduced to stop letting agents ripping off tenants and landlords, says the Office of Fair Trading (OFT).

New letting agents laws needed

If there’s one thing that tenants and landlords tend to agree on, it’s a mistrust of letting agents.

Letting agents have repeatedly come under attack from both parties over the past few years with accusations ranging from charging too high fees to not carrying out their duties properly. And with a growing private rented sector, complaints about letting agents are set to grow.

The OFT has reviewed consumers’ complaints about the private rented sector and compiled a report which sets out a number of recommendations for government and the industry in order to make the market work better for everyone

The main issues

The OFT report found the main areas of concern for tenants were surprising and high charges, confusion about holding deposits, misleading advertising, repairs not being carried out on the property and non-refund of security deposits.

Landlords’ concerns focussed on agents not doing what they agreed in the contract and not passing on rent collected.

Back in September 2012 housing charity Shelter found that one in four people had been ripped off by letting agents while a Which? investigation carried out in November 2012 also found high unexpected fees and “drip pricing”.

Anyone can be a letting agent as the industry is completely unregulated. A slow property market in the past few years means many estate agents have moved into the lucrative, and growing, lettings business. However, it’s also possible for someone with zero property knowledge to set themselves up as a letting agent.

Recommendations

The OFT has made several recommendations in the report. These include better compliance with legislation and in particular better up front information. It says fees should be set out in a clear tariff of charges.

It also wants to see a general redress mechanism so landlords and tenants can sort out problems when they occur, and an enforcement strategy for agents who do not comply with the law.

Another issue is consistency within the industry. The OFT would like to see common principles applied throughout the industry, such as the information used for pre-tenancy checks.

Whether any of these recommendations will work is open to debate. Capping fees rather than just listing them more clearly, for example, would be more popular with tenants and landlords.

Fees

Fees are the big issue in the lettings market with agents charging a number of fees on top of the monthly fee they charge the landlord. These can be for anything from credit checks and signing a contract, to writing an inventory and “checking in” and “checking out” a tenant as well as visits to the property and registering a deposit.

Often the agent will charge both the landlord and tenant for the same thing. And more often than not, the fee will bear no relation to the amount of work involved. For example, just signing an Assured Shorthold Tenancy contract can cost £200 despite the contract being free to download online and the letting agent simply needing to insert names and dates.

Often fees are “drip fed” once contracts have been signed. For example, once the initial contract term comes to an end the landlord and tenant are often charged a renewal fee whether or not the agent has played any part in negotiating a contract renewal.

Can you avoid letting agents?

Letting agents are employed by landlords to either find a tenant or find a tenant and also manage the letting – collecting rent and dealing with repairs etc - on an ongoing basis.

As such, it’s the landlord that chooses a letting agent. Landlords normally pay a monthly fee to the agent, typically 10 to 15% of the rent for full management.

Landlords can choose to bypass letting agents and find tenants and manage the property themselves – but this can be time-consuming and stressful.

Tenants searching for a property to rent tend to approach letting agents as they have access to a large number of properties. Dealing with landlords directly can often work out cheaper but then renters run the risk of having a rogue or amateur landlord.

What next?

At the moment all the OFT has done is make recommendations and there’s no onus on agents to follow the regulator’s suggestions.

As the private rented sector has grown, there have been repeated calls for the lettings industry to be regulated. Currently letting agents can join the Association of Residential Letting Agents (ARLA) but it’s purely voluntary and, crucially, doesn’t cap the fees its members can charge.

More on renting and letting

Dealing with letting agents

The lessons I’ve learned since becoming a buy-to-let landlord

Tenants: how to get your deposit back

Landlords hit by first mandatory licensing scheme

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Comments (5)

  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    Considering that estate agents are also acting as letting agents, regulation is needed to stop some of the more blatant scamming.

    Any fee charged should be in relation to the work required, and should not be charged twice.

    I know several people working in the lettings industry, and they can make up fees as they go along, or charge what they think the person, landlord or tenant, can afford. While some may consider this free enterprise, we have to question people who make money from absolutely nothing.

    When does making money change from profiting to scamming? This is a fine line. Is a referral fee, sometimes in the hundreds of pounds which is paid often for a simple phone call, legal? I was charged £80 referral fee for my estate agent recommending a HIP provider, and they didn't even have the decency to tell me that they would earn from making one simple phone call.

    Regulation won't stop the scamming, but it does mean that landlords and tenants will be able to prove breaches should they decide to take an agent to court. Estate agents still ring fence and withhold offers, but if they get caught doing this, can be prosecuted for breaching regulations.

    People complain that these things should not need to be regulated, but regulation is often needed because an element take the law in to their own hands, charging what they want, and often creating terms and conditions that disadvantage the individuals they are supposed to represent.

    After all, if it wasn't for regulations, many who work for employment agencies wouldn't benefit from employment laws protecting things such as holiday entitlement. Agencies used to be allowed to work their staff without holiday entitlement, claiming they were solely acting as an agent, whereas regulation states that an agent is technically an employer, and must offer statutory holiday to anyone on their books.

    So, does regulation work? Only in the fact that if you feel your agent is taking the piss, you have a recourse to bring them to task.

    Report on 20 February 2013  |  Love thisLove  0 loves
  • yocoxy
    Love rating 152
    yocoxy said

    I use two different agents and I'm happy with both. I negotiated a good fee with both and if either mess me around, they'll lose business to the other.

    Why do so many people think that regulation should take the place of normal business processes?

    The last thing I need is more regulation which forces more cost into the process to protect the naive few.

    Report on 04 March 2013  |  Love thisLove  0 loves

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