Shelter slams letting agents over their fees

Tuesday 29th May 2012

Housing charity Shelter has broadened its attack on upfront fees charged by letting agents.

Shelter already has an active campaign under way in Scotland, where upfront fees are illegal, but it has now launched an attack on lettings agencies in Wales.

The timing coincides with the move by the Welsh government to introduce compulsory licensing for both agents and landlords – a move that could set a precedent in the rest of the UK.
 
Shelter Cymru carried out a mystery-shopping exercise with letting agents across Wales to investigate fees and charges and how they vary between agents.
 
Agents were asked about the costs of setting up a tenancy, deposits required, the upfront costs of renewing a tenancy, charges for credit checks, late payment charges and any other fees or charges.
 
Researchers found that some tenants could be charged as much as £594 in set-up fees for a property at the average market rent.
 
It means that as well as finding one month’s rent in advance and a deposit usually totalling a month’s rent, prospective tenants needed to find additional fees and charges of around 45% of the monthly rent. With some agents, this sum could be as high as 120%, says Shelter.
 
Additional charges included fees to renew contracts, check-in and check-out fees to hand over keys and check inventories, and non-refundable pre-contract administration fees for everyone who applied for a tenancy regardless of whether their application was successful.
 
John Puzey, director of Shelter Cymru, said: “You have to question how reasonable these charges are when credit checks can be carried out online for £20 and tenancy agreements are usually standard template contracts.

“These kinds of unregulated charges, which are now actually illegal in Scotland, are making the private rented sector even more unaffordable at a time when many people in Wales are already struggling to find and keep accommodation.
 
“In addition, we found that most charges were not well advertised so prospective tenants are often unable to discover the true cost of setting up a tenancy until they are well into the process of making an application, by which time they may already have handed over some non-refundable payments.
 
“Some agents charged a flat administration fee to all tenants, while others varied the fee depending on the rent level, raising the question of why the amount of administration work should depend on the tenant’s choice of home.
 
“This lack of transparency traps people into paying additional fees as it is almost impossible for them to make an informed choice when they start the process of renting a home,” he added.
 
While a minority of agents published the costs of setting up a tenancy on their websites, the researchers found that with the majority this information was very difficult to obtain without asking very specific questions of the salespeople.
 
The Property Ombudsman’s Code of Practice for Residential Letting Agents states that agents should flag up any potential liability for fees, charges and penalties ‘prior to an applicant’s offer being formally accepted’.  
 
But Shelter said that this is a very late stage in the process, by which time many tenants may have already committed money in the form of administration charges or holding deposits. The charity says that disclosure of fees post-application means that tenants are unable to exercise consumer choice in this area, which removes any incentive among agents for competitive price-setting.
 
Puzey highlighted the proposals in the Welsh Government’s Housing White Paper for the compulsory accreditation of private landlords and letting agents in Wales and urged the Government to ensure that the forthcoming Code of Practice includes clear standards on transparency in agents’ fees and charges.
 
He said: “The private rented sector is a significant and growing element of the housing market in Wales and so we need to ensure that agents operate to the highest standards.
 
“We hope that accreditation will lead to greater transparency and a more efficient rental market for tenants, but if this does not happen then maybe a total ban on premium charges should be considered.”

The Shelter research in Wales showed that two adults renting a three-bed property pays a total of £1,448 in upfront fees on average, while two adults in a two-bed property pay £1,295 and one adult in a one-bed property pays £1,054.

Plaid Cymru’s housing spokesperson, Llyr Gruffydd AM, said: “Shelter Cymru’s research highlights some very serious concerns about the hidden charges people can face when renting a home. Plaid Cymru now wants to see some swift action on this issue from the Labour Welsh Government.

“At a time when the Westminster government is reforming housing benefit in a manner that will increase the amount of families looking for a new home, it is crucial that the Welsh government mitigates this by tackling the excessive hidden charges that tenants in the private sector face.
 
“While we welcome the Welsh government’s promise to tackle these hidden charges through new legislation on tenancy reform, we are concerned at the apparent lack of urgency. For many Welsh families, action needs to happen now. Bringing forward their proposed legislation on tenancy reform, rather than delaying, is an example of practical action they could take now to stand up for Welsh families.

“I urge the Labour Welsh government to stand up for Welsh families by taking swift action to tackle this problem.”