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Letting agents' fees... Out of control?

Friday, August 9, 2013 Posted in: Other

You’re bound to have seen recent reports of letting agents’ fees being “out of control”

James Naughtie, Campbell Robb, chief executive of Shelter, said that he was calling for a "transparent" relationship between the person who pays that fee, the letting agency, and the tenant. Shelter in recent weeks has stepped up their campaign to make it unlawful for lettings agents to charge any fees at all to tenants.

Across the industry the average compulsory lettings fee that renters pay to a landlord’s agent in setting up a tenancy is £355.00. Shelter would like to see tenants’ costs limited to the protected deposit and rent in advance.

After a similar campaign by Shelter in Scotland, the Scottish Government in November 2012 ruled to ban letting agents and landlords from charging any tenant fees. Shelter has subsequently been aggressively encouraging tenants in Scotland to take legal action to recover "over-charged" fees and provides claims advice on its website. 

Following the ban on fees in Scotland, many Letting agents have been forced to pass these charges onto their clients as often absorbing them in their tight margins would be unsustainable. Ian Wilson, Managing Director of Martin & Co Scotland commented, "As a business we collected around 7% of total revenue in from the fees which have been banned”.

As an impact of the ban in Scotland many marginal agents have gone bust. Landlord’s average fees have increased, and (according to Rightmove research) this has put greater pressure on rents which have continued to rise.

We at College and County have always taken an ethical approach to agency fees; we often waive these fees to ensure we find the best tenants for our properties and help encourage renewals. David Gilson from College and County reports "A total ban on fees would in general be difficult for the industry and many agents will struggle, I do however believe that bad practice In the industry does need to be addressed and ARLA along with SAFE agent accreditation goes some way to help tenants select reliable ethical agents” he goes on to add “The government is keen to encourage investment in the PRS to meet the housing shortage, with Deposit registration and HMO licencing many landlords are already feeling that their margins are being stretched and agents passing on additional costs to landlords to cover this lost revenue may further deter investment”

Ian Potter, of the Association of Residential Letting Agents, said that an upfront payment was "necessary" as "that is where the costs are incurred". He added that “if costs were transferred to the landlord, that would do nothing more than put up the rent."

We at College and County are concerned that Shelter’s proposal does little to protect exposed renters to all manner of unethical practices on the part of unscrupulous agents. Purely banning fees is a simple way to gain public attention but unethical and illegal practices from rouge agents could end up costing tenants, landlords and leasehold flat owners a great deal more in the long run.

It may be that a fully regulated rental sector with agents obliged to adhere to professional standards is needed if consumers are to be properly protected and the market itself is to function correctly and ethically.

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