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Lettings agents will 'exploit' default fees, claims consumer group

A consumer group says that the Tenants Fees Bill - which will eventually ban letting agents’ fees levied on renters - has a clause which is open to abuse.

Citizens Advice says the provision in the draft version of the Bill - which says tenants could be required to pay these fees if they default on part of their tenancy agreement by paying their rent late or breaching a condition in their contract - could be exploited by landlords or letting agents.

It says that the fees which the government wishes to abolish (which CA claims includes charges for inventory checks and exit fees) will simply be written into tenancy contracts and reframed as breaches of agreement if the tenant refuses to pay.

“The government’s pledge to ban fees paid by renters is absolutely right. Yet this goal risks being fundamentally undermined by a loophole that could be used by unscrupulous landlords and agents to charge tenants fees through the backdoor” claims Gillian Guy, chief executive of Citizens Advice. 

The same issue was amongst those picked up by the Select Committee on Housing, Communities and Local Government, which reported last week - the committee’s comments were reported on Letting Agent Today at the time.

Guy claims: “The committee recognises that default fees are open to abuse, but their solutions do not go far enough. Each month renters are paying more than £13m in unfair and unaffordable fees, which would mean a total of more than £200m since a ban was first announced in November 2016.

“The government must act quickly and commit to removing this default fees clause, creating a Bill that will achieve its aim of a fairer and more affordable lettings market.”

  • Simon Shinerock

    Let me explain the nonsense behind this purely political move. The average Lettings agent works on a margin of about 15% and more than 15% of its income comes from tenants. Therefore if they don’t increase their fees to landlords they will be operating at a loss. The landlord won’t want to pay extra and will therefore put up the rent to compensate, certainly by more than the cost of the additional fees. All this move will achieve is a culling of weak agents and an increase in the cost of renting to tenants. It’s number two out of three crazy policies perpetrated by government on the sector, the others being taxing costs and new regulations with exams etc

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    Well said.

     
  • jeremy clarke

    Just one question for all letting agents out there.
    How many times in the past 5 years has a prospective tenant complained, walked away from your office or refused to take a property because of fees?
    At our office we are struggling to recall any but we can list 6 or 7 who have paid fees and then disappeared without taking the property or requesting repayment of fees!
    So, is the payment of fees an issue at all?

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    Last year, me and my partner were looking for a flat. Found great property, however agency in London wanted to charge £720 in fees for both of us. There was no will to negotiate on fees, so we walked away

     
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    Only if the agent charges ridiculous fees, if the fees are fair there is no problem at all.

  • SCN Lettings

    And therein lies the problem. Some agents have been charging £400 to £500 in fees when £200 is probably about right. So the rest of us are being punished for the actions of the minority. Ultimately the tenant will pay through a higher rent. And who will pay for all the letters and phone calls chasing the late payers? Oh that's right-the agent will as they cannot charge a fee.

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    There should have been a cap on fees introduced, and a cut down on the stupid other fees agents can come up with to charge, not a total ban. As everything pans out and usual routine of today's world, i agree that those who think they are clever and abuse the system, spoil it for the rest of us honest people.

    I am glad to hear you walked away Albert D, £720.00 on fees?! That is just outright wrong and there is no need for this, only greed and dishonesty. As a letting agent, i couldn't give you an honest answer to how much of that fee they would actually and honestly require to cover their costs!

    SCN Lettings... i was in agreement with you up to the very last point you made. The agents take on phone call and fees for chasing tenants? Come on!! In my time, real estate agents like me was paid something called a 'wage' to make phone calls and chase tenants, i don't agree we should charge a tenant a fee to send a letter and make phone calls! That's exactly what is wrong in today's market... this exact mentality right here!

    And before you say it, when i say 'a time', no i'm not old. I'm only 30, just come from an honest place of hard work with an old passion for the job!

    Courts need to be easier and faster to punish the law breakers to deter them, but we are all doomed from our own stupidity and expectations of today's world! If only common sense prevailed like the old days :-(

    I'm actually hoping as per today's way of the world this leads to most agents increasing their fees to landlords... it won't change our fee structure to our landlords, current and new!

     
  • Andrew Hill

    The government and consumers are already exploiting us. The last time I looked, nobody stepped in over the price of biscuits, tea bags or sugar... Yet everyone is up in arms about tenant fees? To be fair, if there were more protection for landlords from rogue tenants, our tenant fees won't be so high. Screening tenants to make sure our clients get the right tenant takes time and money. We're liable if we don't adequately screen tenants. Why shouldn't we be able to charge tenants for the work we do to open the door for them? I don't understand how a default fee can be abused. Tenants should just refuse to pay a higher fee and report agents who abuse it, hand out banning orders for agents who do flaunt the rules, drive them out of business. There's no place for rogue agents in our industry, I think we can all agree?

    Property  Guru

    Its all about votes in Westminster and tax, nothing to do with tenants money.
    Does the government bother to interfere when the tenants don't pay for no reason or keep the universal credit? Such a clever system. :(

    Private landlords pay for public sector errors.

     
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    Cap at £250.00 per Tenancy all in. Very Simple.

  • Property  Guru

    What right does the government have to remove fees? Its the politics, (Ie Hundreds of tenant per one agent the numbers win voters game) So the landlord absorbs some of the cost and put the rents up, oh wait..look more tax for the government that the tenant pays. We are all so short-sighted. So the agreement between the agent/tenant surely is at their discretion. If the tenant does not want to pay the walk away and go somewhere else cheaper. The agreement is between two parties. Just like any other agreement. That why we have PRS/Trading standards for complaints and ability to shut down the bad ones. We all have signed up to it by law and paid fees while they, in fact, cut the public services in general. The government took the money and provides a service to help tenants with many things including customer complaints. Yes, there should be a fair across the board cap say £300 per home. A but that's not going to win as many votes of course. Anywhere else tried this it would be criminal to interfere in someone else's business. If we were all one big company trying to complete a buyout/takeover and forcing loss off jobs losses they would soon stick there nose in but as it affects many tiny companies its ok. It's not fair to tenants, landlords or genuine hard working agents. Just my humble thoughts on the subject.

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    If an agent properly costed his work, and by inference his time spent on management, he could do worse by putting himself in the shoes of the landlord and saying, well if I have to do something I want paying otherwise you can do it yourself for nothing! If you tot it all up a 10%? monthly fee doesn't nearly cover the cost. Tenants should have to pay referencing costs, but that it all. Nothing for inventories (mainly for landlord's benefit), nor ASTs. I think most agents would be more than happy with that.

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    I disagree with no charge for the Inventory as a good agent will make sure that the inventory covers both for the landlord and the tenant, especially in this day and age of disputes for almost everything, however I do not mean tenants should pay a huge fee but just something towards it and our time for going through all the paperwork that is now involved in a tenancy and explaining it prior to them moving in.

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    Tenants have no real interest in an inventory if they are aware of the claim process, as landlord cannot claim anything from a deposit unless condition can be proven at the outset, the burden of proof rests with the landlords not the tenant. If there is no inventory the tenant has the upper hand if they won’t agree a deduction
    To prevent an agent or landlord charging a tenant for costs incurred associated with late payments or other defaults sends the wrong message completely, but government seems intent on hammering landlords no matter what is right or wrong it’s all about votes and sadly tenants have more than landlords and agents by far
    Tenants ultimately pay via rent and loss of supply but continued propaganda by governments press and BBC outlets support the continued landlord bashing.

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    I would disagree with Raymond's remark that tenants have no real interest in an Inventory as all of my tenants as nearly all of our tenants thank us for such a detailed one and one that is not one sided.

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    Of course some tenants will appreciate an inventory the point I was making is they have nothing to lose if the landlord does not provide one, that is indeed in their favour. So landlords must prepare one or they will have problems making any claims for damages no matter how clear they are

     
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