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
Well said Arnie
Agents and their staff and their landlords and tenants pay taxes, which subsidise the Local Council and LGAs very existence.
If agents didn't have to carry the burden of such organisations whose employees enjoy greater security, higher salaries and protection from the real world outside the public sector where we all have to pay our own way without taxpayers contributions, their charges would be less.
I would say that compared with Estate agency fees, mortgage set up fees and council licensing fees, letting agent fees are very cheap for the amount of work that is done.
The market is the best regulator there is.
"Campaign of abuse” just about sums up Shelters stance. If they have a problem with charges they should quote the actual figures and the names of the agents.
Talk about biting the hand that helps feed them. Stop all gifts to them - now - until they stop the way they are conducting their campaign and quote what service THEY think should be provided and at what charges. Would make very interesting reading.
Dial in people, just one case of excessive fees is one too many, it damages our already fragile reputation. Quit comparing the ‘similarity’ of other professions because unless I’m mistaken 2 wrongs still don’t make a right. This is our problem, one that even Ian Potter, MD of ARLA recognises so lets show a little deference and actually deal with it.
Ok so lets translate this tribal tattoo, just what is a reasonable fee? Clearly it’s not something we can all agree as it’s an obvious product of our individual business expenditure that includes everything but a mix tape.
The use of member agents with CMP and redress sounds comforting but that’s a journey I can’t take with you. The inference is that the agent will be ethical with safeguards in place but that doesn’t equate to reasonable fees. Member & non-member agents share the load here as well as other misdeeds. In all probability it’s a good start but we need something more substantial, the alternative is a figure set by government or it’s abolishment.
We’ve had judicial change before and dealt with it, we b*tch and moan but we adapt and move on and once again It’s about how we deal with change because make no mistake Dorothy, Kansas is going bye bye.
Those with reasonable fees shouldn’t have any trouble assimilating costs so giddy up and charge your landlord. The rest of us need to re-evaluate…
Surely if councils have a problem with the rents and fees charged by landlords and agents operating businesses in the private rented sector, they have an easy solution to hand: build more council houses. Then they can let them out for whatever rent they like (have them rent controlled if they really want to!) and charge whatever fees they like. It would reduce the pressure on the private rented sector and ease the housing crisis, and with reduced demand rents would fall due to the law of supply and demand.
Otherwise, stop whinging about those nasty landlords and agents making a profit out of their investment and regulate the whole shooting match.
We keep reading similar headlines and comments about ‘rip off letting agent fees’ however the firms that do this don’t get named. The vast majority of agents offer a good service at a fair price for landlords and tenants. Letting Agent Today, why not carry out a survey of letting agent tenant fees and make the results of the survey public?. I believe we will see value for money offered by most letting agents in the UK. Providing a quality service to landlords and tenants is not easy and it is not cheap. Property management and lettings is a high volume transaction business with a significant administration burden. Professional people need to be trained and paid on a competitive basis. IT systems, premises and marketing are expensive business costs. The focus on letting agent fees is misguided and regulation will not deliver the desired outcomes…… just look at financial services in the UK, over the top and useless regulation has delivered nothing but continued failure to millions of people.
How about the EXTORTIONATE council tax charged by these councils?
Most agents advertise their fees and tenants have a choice whether to use that agent or not. We do not have the choice about whether to pay council tax or not.
"All fees should be justifiable and reflect the work involved or the expertise being sought."
Some jobs are easy, some are like pulling teeth - do you suggest variable rates?
Although I have no truck with agents who charge high fees for little work, local authorities are being hypocritical as their fees for planning applications, licensing etc do not reflect the amount of work involved and appear to be just about generating revenue. Also no one ever seems to have a go at the building societies whose fees are extortionate. All fees should be justifiable and reflect the work involved or the expertise being sought.
KBG - bullseye.
I think ARLA, Councils, Shelter are just after public favour by attacking an easy target rather than addressing a difficult problem.
Time people started working together - not slagging each other off.
Mr Potter calls for regulation - it's not going to happen - so lets think of alternatives.
Eric Walker wrote an interesting blog on this site which proposed that we stop banging on about regulation and empower consumers.
I really think this sort of thinking has merit and would appeal to LA's Shelter etc as well as not being to steal ARLA's self proclaimed mantle.
http://www.lettingagenttoday.co.uk/news_features/Eric-Walker-Blog
At least Landlords will have a licence, unlilke Chris Huhne
Why don't those MP's get their own house in order first?! We haven't forgotten the MP's expenses row yet ! Most of them were using property to claim expenses wrongly, etc. Why do they keep moaning about 'some agents' extortionate fees but they keep rejecting licensing?
More agents keep setting up shop in our area, with no PI or PL insurance, not registering with ICO or MLO, quoting fess "including vat" when they're not even VAT registered. I bet they'll use clients deposit money to trade off too!
The government have stated that they don't want to license letting agents as it will decrease competition in the market, but they are allowing non-compliant rogue agents like the above to set up and potentially cause their clients financial heartache when things go wrong and there is no governing body to go to.... ????
I find myself agreeing with EW's common sense approach. There is no doubt that until you change public perception the problems will continue. Like drink driving.
Agents can only survive with customers. Educate the public and give them teeth.
Agree with above,what ever next, lets have ago at lawyers £250 plus an hour, Car sales, profit. almost every thing you can buy, has a profit in it for someone.
I think Councils licensing fees are extortionate considering all you get is more red tape, interference and a Council owned database which will inevitably be sold off to insurers, lenders and specialist services. It will never encourage those intent on malpractice to change.
Agents perform a service - good agents perform a good service and will disclose their terms and costs well before any party enters in to a binding contract.
Its an other example of Councils focusing on a very small minority of bad agents rather than the myriad of firms which subscribe to voluntary regulation.
Councils would serve their residents better by spending their money encouraging tenants and Landlords to only use agents which are members of ARLA, NAEA, Law Society, RICS and which hold CMP, PI insurance and are members of an independent redress scheme.
The only way the industry will change is by changing consumer habits. Reduce all agents fees and they will have to find savings. It would be ironic if those savings were to costs associated with regulation and compliance.