New rules force letting agents to display fees
Legislation designed to tackle rogue agents.
New legislation comes into effect this week which requires letting agents to clearly publicise fees charged to tenants.
The new legislation is contained within the Consumer Rights Act 2015 and tackles an issue which has long been controversial in the private rented sector.
Renters complain that not only do they have to pay sky high rents, but they are often forced to pay several hundred pounds for various administration tasks before they move into a property.
Fees must be on display
The legislation, which was announced last year, comes into effect on 27th May 2015.
Announcing the rule change last year the Government said: “The move ensures a fair deal for landlords and tenants, closing off the opportunity for a small minority of rogue agents to impose unreasonable, hidden charges.”
Previously, the Advertising Standards Authority (ASA) required letting agents to list compulsory charges to the tenant upfront in the process. Those letting agents who were found to have imposed hidden charges faced little more than being 'named and shamed' on the ASA website.
The new rules go a lot further than this and require all letting agents to publish a full tariff of their fees, both on their websites and prominently in their offices. Any agent who does not comply with these new rules will face a fine of up to £5,000.
The reasoning is that requiring full fees transparency deters double charging and enables tenants and landlords to shop around, encouraging letting agents to offer competitive fees.
How much are the fees?
Ask any tenant and they will undoubtedly have a horror story to tell you about letting agent fees.
The fees in question tend to be for setting up a tenancy agreement, conducting an inventory, checking references and credit reports, and registering the deposit in a Government-approved scheme.
The trouble is the fees often bear no relation to the work involved. For example, some agents charge £200 for an assured shorthold tenancy agreement (AST), a document which they will have on file which will need only a few quick amendments and printing for each tenancy.
Many agents charge renewal fees when the initial fixed term is up, even though this involves minimal work for them: they simply re-issue the original contract with a date change.
Worse still, some agents charge both landlords and tenants fees for the same thing. And don’t forget that landlords are already paying the agent a monthly fee for their services.
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Do the new rules go far enough?
According to a report from Citizens Advice earlier this year, rip-off letting agency fees are costing Britain’s private sector tenants an average of £337 a go.
Tenants complain that the fees, on top of rent and a deposit, make moving house prohibitively expensive. In many cases renters don’t even want to move in the first place – evictions or rent increases mean they are forced to.
Citizens Advice is among a number of groups calling for letting agents’ fees to tenants to be banned completely – a policy Labour would have introduced if the party have won the election.
Citizens Advice argues that the agent works for the landlord, so the landlord should pay the fees.
I think that's right. Without an outright fee ban rogue agents can attract business by offering landlords cheap management fees. They then make their money by hiking fees to tenants who are forced to pay up due to a shortage of rental property available.
If agents were only allowed to charge landlords fees it would lead to downward pressure on fees and an upward pressure on quality of service. Landlords would avoid agents who charged high fees, forcing them to either reduce their fees or leave the industry.
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More new rules
Other rules that come into effect this week include the obligation for letting agents to state whether or not they are a member of a client money protection scheme and which redress scheme they are signed up to.
Client money protection ensures a clear separation between money that belongs to a customer and money belonging to the letting agent. In practice it means that rent due to landlords will be kept in a separate account to money used to run a letting agent business.
From October 2014 letting agents have been mandated to join an approved redress scheme that can mediate in the event of a dispute with either a landlord or tenant. From this week, membership of a scheme needs to be clearly stated by each letting agent.
The three Government-backed schemes are: The Property Ombudsman (TPO), Ombudsman Services Property, and The Property Redress Scheme. A local council can issue a fixed penalty fine of up to £5000 to a letting agency branch that fails to join one of the schemes.
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More on renting:
Letting agent demanded £600 just to go away
The lessons I’ve learned since becoming a buy-to-let landlord
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