Pressure is growing on letting agents over their fees, described as ‘extortionate’ yesterday to MPs.
Local government leaders said that the ‘extortionate’ fees charged by some letting agents are exacerbating the housing crisis.
Some letting agents have been found to be charging non-refundable admin fees in excess of £500, according to recent research by Shelter – and cited by the Local Government Association.
The LGA, which represents more than 370 councils in England and Wales, raised its concerns, along with issues about rogue landlords, at the select committee inquiry on private rented sector housing yesterday.
The LGA said that as well as being unfair on the increasing number of people who rent, letting agent fees in some areas are so high they are a barrier to people being able to find a house or flat in the private rented sector, particularly younger people on low incomes.
The LGA told MPs that some local authorities have set up their own letting agencies to ensure tenants get a fair deal.
The LGA said that councils believe private rented housing plays an important part in meeting housing need, and work with landlords to ensure the availability of good-quality appropriate housing in the local area.
While the vast majority of private sector landlords provide good housing, local authorities are calling for more effective powers to protect tenants from rogue landlords who do not.
Cllr Tony Newman, member of the LGA’s Environment and Housing Board, said: “With the housing market stagnant and a shortage of mortgages available to help first-time buyers, people are increasingly turning to the private rented sector to find a home.
“Now, more than ever, we need safeguards in place to help people find good rental properties and protect those who rent from bad landlords and rip-off letting agents.
“For many people looking to rent, especially the younger generation moving out from their family home, the up-front costs of a deposit and agency fees can be huge. We’ve heard stories of some letting agents charging hundreds of pounds just to carry out basic credit and reference checks. For people in the early stages of their career and on relatively low incomes, this can prove a stretch too far.
“Pricing people out of private rented housing in this way is adding to the pressure on already over-subscribed waiting lists for council and social housing.
“The vast majority of private sector landlords provide good housing and a fair deal for their tenants, but there are some bad landlords out there which give the rest of the sector a bad name by renting out shabby, substandard homes.
“We’ve seen examples of people being made to live in squalor in properties that are small and unsafe, crowded in with too many other tenants by landlords more concerned with their profits than the wellbeing of their tenants.
“We need Government to strip away some of the needless bureaucracy which makes it more difficult for councils to help protect those tenants who are being ripped off and forced to live in substandard housing.”
According to the Government’s most recent English Housing Survey, there were 3.62 million private rented households in England last year – an increase of more than one million in six years. Over the same period, the number of people owning their own homes fell.
Official statistics also show that the number of families in England waiting for social housing rose to 1.85 million last year.
The LGA said councils are concerned that some of those families may be being denied the opportunity to rent privately because of excessive letting agent fees and dishonest landlords.
Councils are also calling on the Government to lift some of the restrictions which make it hard to tackle rogue landlords who exploit tenants.
This includes:
* ensuring that courts are able to issue fines which properly reflect the harm caused by landlords who illegally over-crowd rental properties
* reviewing the outdated system by which councils have to assess and inspect private rented sector homes – councils believe the Housing Health and Safety Rating System is too slow, bureaucratic and no longer fit for purpose
* giving councils greater flexibility over how they license Houses in Multiple Occupation in the private rented sector.
Ian Potter, managing director of ARLA, said: “As the LGA’s research shows, many consumers today are falling prey to bad practice in the private rental sector.
“For this reason, we have been calling for regulation of the sector. Currently anyone can set up shop, regardless of their training or experience and without any need to adhere to a code of practice or standards. Some local authorities are introducing licensing measures, but these are by no means the norm and this approach risks creating a confusing system that varies across the country.
“The challenge is, with the current undersupply of homes, tenants may feel pressure to pay high fees, or live in substandard properties.
“In the absence of statutory regulation, tenants should do as much research as possible, and consult organisations like Citizens Advice, ARLA, or the Property Ombudsman.
“They should also check the terms of their fees and charges against Consumer Protection Regulations, or Consumer Contracts Regulations, as some of the cases cited by the LGA may be in breach of these.”
Comments
Completely agree that agents fees need to be up front and 100% transparent. However completely disagree that there needs to be any element of controlling price.
A well known pizza chain charges £15 for a pizza which costs them less than £1 to make. Other well known forms charge over £3 for a cup of coffee. This is extortionate, but we don't feel the need to regulate them - the consumer makes a balanced decision on whether to purchase. If the price was too much, we'd go and buy pizza and coffee elsewhere.
Just my opinion but NO administration fees should EVER be retained if the applicant fails to secure a tenancy apart from "reasonable" costs.
An agent I worked with recently with will take an application and a reservation fee of around £500 depending on how many tenants.
Of this, around £300 will be converted to part-fund the deposit once the tenancy has been created - the remainder (around £200) is the fee for everything.
That means EVERYTHING. No check-in fee, no fee for an inventory, no fee for references despite how many are required. Oh and another thing NO FEE FOR TYPING A REFERENCE LETTER WHEN THEIR TENANT APPLIES FOR A FUTURE PROPERTY WITH ANOTHER AGENT.
What happens if the application is rejected?
Three scenarios here. Both fair in my opinion.
1) Applicants lied about adverse credit which shows up on a credit check. Result - the agent charges about £50. However, the applicants are warned that this could happen
2) The agent decides there is too much risk based on length of employment/status etc. We all know what to look for. The WHOLE amount of money is re-funded - EVERY TIME
3) The Landlord does not like the sound of them - perhaps they have a pet and the Landlord is really not keen. As with 2) above - the WHOLE amount is refunded.
I will add that with points 2 and 3, the whole amount is re-funded regardless of whether the agent spent money on a credit check.
I spoke to a letting agent once who actually used the phrase "Oh no - we screw them for the admin fee - we don't refund anything".
Taking the above into account how about this. I have a (parody) business proposition. Does anyone want to go into business with me? We start Acme Lettings, advertise our mates houses for rent, show people around, take a fee, reject them and keep the money. Just keep changing the properties advertised and cut our mates in.
I am NOT for more red tape in the industry nor do I suggest that the above actually takes place???? However, agents ARE exploiting Tenants with rip-off fees.