New Row Over Letting Agent's Evil Fees

New Row Over Letting Agent’s Evil Fees

Homeless Charity Wants All
Letting Agent Fees To Be Met By Landlords

The homelessness charity, Shelter have started to campaign to get all letting agent fees currently charged to tenants banned throughout England, and they want landlords to foot the bill for it, a point which has angered the Residential Landlords Association (RLA) and caused consternation with the Association of Residential Letting Agents (ARLA) and the UK Association of Letting Agents (UKALA).

Shelter have launched a new report, “Letting Agencies: the Price you Pay”, claiming that charging landlords is a fairer way of doing business and the charity also claim that tenants are having to go without food or heating to meet increasing housing costs because letting agents’ fees are out of control.

Shelter were instrumental in getting letting agent fees banned in Scotland and now want the practice outlawed by MPs in England and are calling for politicians to take action.

The homelessness charity seem to think that all letting agents are the devil in disguise and recently questioned 58 separate letting agents throughout England, anonymously, asking them about what fees each charged in order to set up a tenancy for a tenant and discovered the average administration fee charged by agents was £350 (GBP) plus upfront rent and tenancy deposits. Less than a third of letting agents questioned charged fees totalling more than £400 and seven charged in excess of £700.

The Shelter research claims that in the last three years,

  • 25% of tenants in England had to borrow money to pay for letting agency fees,
  • 17% of tenants had to make other cuts in household spending such as food or heating to meet the cost of letting agent fees.
  • 25% of tenants also claimed that letting agents’ fees stopped them from moving to a new home.

Shelter state that in some cases it investigated, letting agents did not refund fees to tenants if the tenancy failed to proceed, even if it was through no fault of the tenant.

The charity sent emails to supporters and followers to request them to sign a petition and the charity’s views were also included in a controversial article broadcast on Radio 4’s Today programme, entitled “Are Letting Agents Out Of Control?”

Chief executive of Shelter, Campbell Robb, made claims on the Today programme, that letting agents were charging landlords and tenants for providing the same service, although the contract was with the landlord.
He said: “Anyone who has tried to find a rented home in the past few years knows that affordable, decent places to live are in short supply, and often snapped up within hours. The high demand for rented homes means that tenants can’t shop around, but instead have to deal with the letting agency their landlord has chosen. They have no choice but to swallow their anger and stump up their cash. People often forget that the landlord is the real customer of a letting agency, but the fact that tenants also pay fees, leaves both expecting the agency to act in their interests. This adds up to a confusing situation that leaves landlords in the dark and tenants powerless. The only way to fix our broken lettings market is for the Government to stop tenants being charged for the costs of setting up a tenancy.”

In reply, Managing Director of ARLA (Association of Residential Letting Agents), Ian Potter, said “Upfront payment were necessary as that is where the bulk of costs are incurred and if all the costs were transferred to the landlord it would put up rents for tenants”.

There was some dispute between Mr Potter and Mr Robb as to whether rents in Scotland had risen as a result of the ban on letting agent fees.

The homelessness charity’s campaign may be aimed at letting agents, but the launch of the new report was greeted with a terse response by the RLA chairman, Alan Ward, who accused the charity of anti-landlord rhetoric because of the proposal to have landlords bearing all the costs of setting up a tenancy.

Mr Ward said: “Once again we have Shelter peddling the same anti-landlord rhetoric, seeking to place yet more costs on the shoulders of landlords. With almost 90% of landlords being either individuals or couples renting out just a few properties, Shelter seems to think that landlords have a bottomless pit of money to spend. A similar scheme in Scotland has put many letting agents out of business, thereby reducing choice for tenants and landlords. Shelter’s campaign to impose on landlord’s excessive and unneeded red tape and costs will only serve to drive up rents for the very same tenants they try to serve.”

Landlords are already estimated to be paying letting agents over £1 Billion (GBP) a year to secure and keep a tenant, although many landlords can calculate that they often end up paying agents a great deal more via ambiguous management fees, or for arranging maintenance or repair works that need doing to properties.

The row also brought stern comment from Caroline Kenny, executive at the UK Association of Letting Agents (UKALA), who said “It was not always appropriate for only the landlord to be charged pre-tenancy costs, as matching prospective tenants with suitable properties is resource intensive and can be extremely costly. The bulk of any agency’s costs are covered by the fee paid by their landlord client. However, it is not always appropriate for the landlord to meet pre-tenancy costs, particularly when they are associated with proving the suitability of an applicant. It is therefore appropriate for a prospective tenant to contribute towards the administration and referencing process before a tenancy begins. This demonstrates commitment to the prospective tenancy, safeguards against an applicant securing multiple properties simultaneously to then reject all but one at the last minute, and protects agents and landlords from applicants who provide false information. Tenants ultimately benefit from these processes being carried out professionally. Proper process such as the inventory check-in and check-out helps to protect the tenant. As an industry, we must continue to push for minimum standards to be adhered to, including the provision of Client Money Protection and Professional Indemnity Insurance, a commitment to professional development, transparency of all terms, conditions and potential charges, and most of all, excellent customer service. At UKALA, we are completely against overcharging. Unfortunately, however, there are unscrupulous agents operating within the industry that are overcharging tenants and damaging the industry with their dishonest practices. Within any market place it is important for consumers and providers to find a price-point at which businesses can succeed and consumers can receive value for money. In order to achieve this, UKALA believes that agents should ensure that any fees and charges are made clear in advance of entering into any business relationship.”

Letting Agents fees are far from evil. Landlords and tenants are charged fees because although some critics may claim they are providing the same service to both parties, this is not the true case and charges cover the time and manpower required for individual tasks:

Landlords are charged for the time taken to produce required paperwork in order to conform with both Government and local authority legal requirements such as energy performance certificates, gas safety checks, preparing and conducting an inventory, producing the necessary materials for advertising and marketing the rental property on and off line, conducting viewings, and of course, finding a tenant.

Tenants are charged fees for tenant referencing and background checks, which incorporates the administration time needed to process the information, the drawing up of the tenancy agreement and registration with utility providers at the start of a tenancy.

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