Call for letting agents to spell out charges in APR style

Letting agents should be forced to display their actual costs charged to landlords and tenants in the interests of transparency, in the same way that lenders must reveal their Actual Percentage Rates (APRs).

Under the idea, agents would have to display their actual costs in relation to an illustrated example – perhaps a two-bed flat – so that landlords would know what they would be paying on top of the agent’s stated percentage fee and not be caught out by hidden costs bumping up fees.

Eric Walker of London agents Bushells, which is due to open a further branch shortly, has come up with the idea after looking at competitors’ rates.

He said: “As we head towards the opening of our office in Docklands, I have been looking at agents’ terms of business and I am frankly appalled.
 
“I think agents should display some sort of APR based upon a 12-month let with a one-year extension.

“Assuming they all charge roughly the same for let only, rent collection, management, etc, you would think it a reasonably level playing field for landlords to gauge costs. It is not.”

He said his own firm’s only additional costs are renewal fees, and only where the extension is arranged by Bushells. The fee Bushells charge is £260 plus VAT with the admin fee split between landlord and tenant.

Tenants are charged a £30 reference fee. They also pay for the costs of processing a credit card, but nothing for debit card transactions.

Bushells has found that one firm, as a comparison, charges:
 
•         Extension fees at same rate as for initial term whether they extend or not
•         £500 plus VAT admin fee split between landlord and tenant
•         £250 admin fee to tenant for extension
•         10% ‘supervision’ fee to landlord for all works over £500
•         1.5% if the property is sold (whether agent is involved or not)
•         £50 plus VAT references admin fee
•         3% credit card fee, 1% debit card fee.

Real-life example from Bushells’ books for a 12-month let-only to a couple – extended for one year – move in paid by debit card. Rent £300pw and assuming no works done (excludes VAT):
 
Bushells:
 
Commission: £1,560
Admin fees: £260
References: £60
Landlord extension: £780
Tenant’s fee: £0
Debit Card Fee: £0
 
Total: £2,660.00
 
A.N. Other agency
Commission: £1,560
Admin fees: £500
References: £100
Extension: £1560
Tenant’s fee: £250
Debit card fee: £30
 
Total: £4,000.00
 
Add in, says Walker, a £2,000 boiler: A.N. Other agency gets another £200 from the landlord plus a commission from the contractor!
 
So, on the basis outlined above, one agent actually charges nearly 13% of the rent while another would earn 8.5%.
 
In other words, while both agents claim to charge the same, one in real terms is charging about 50% more than the other.

Is this shocking? What do you think?

And surely this could be dealt with by agents having to give an actual ‘APR’ type example online.