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Written by rosalind renshaw

Tenants are being ripped off by cowboy agents in the ‘exploding’ rental market, says a major new report out today.

It is urgently calling on the Government to regulate letting agents to the same standards as estate agents.

The report’s call is backed by the Ombudsman. ARLA responded by saying all members of the public should use an ARLA licensed agent.

The Resolution Foundation, an independent think tank which focuses on lower income groups, says tenants are having to pay significant upfront costs, whilst agents’ fees are variable and there is a lack of transparency around charges.

The organisation carried out a mystery shopping exercise of 25 unnamed letting agents in three cities – London, Cheltenham and Manchester. It found the range and type of fees charged varied enormously.

For example, administrative fees ranged from £95 to £375. Total upfront costs (including deposit, admin fees and rent in advance) for a one-bed property in London were £2,166, around double those charged in Manchester (£1,028) and Gloucester (£1,094).

Just two of the letting agents displayed the costs of renting on their websites and many renters only discovered charges after they had decided to rent a property.

Average deposits for a one-bed property ranged from £487 in Manchester to £1,099 in London.

Many tenants reported difficulties when moving within the private rented sector as they had to hand over a new deposit before they had got their old one back.
 
Resolution says its findings are particularly relevant given the growing number of households forced into renting for the long term. In 1988 only 14% of low to middle income households aged under 35 were living in rented accommodation, but by 2008 it had tripled to 41%.

The report points out that unlike estate agents, letting agents are unregulated and under no compulsion to hold membership of an ombudsman service.

The Resolution Foundation is calling for:

•  Letting agents to be regulated to the same level as estate agents, so that unscrupulous agents can be banned;

•  All agents to be signed up to an ombudsman service giving redress to tenants;

•  The ombudsmen’s codes of practice to stipulate that agents must display all charges to tenants and landlords on their website and in adverts in a way that is easily comparable across agents;

•  The Government to consider ways to make it easier for tenants to transfer deposits between landlords when they re-tender for the tenancy deposit protection schemes in 2012.

Vidhya Alakeson, Resolution’s director of research, said: “The lack of regulation in the exploding private rented market is of growing concern.

“We need more transparency so tenants at least know what fees they’re facing and to help create a more competitive market. Given that an increasing number of families have no option other than to rent long term, we need to question why letting agents are not regulated to the same degree as estate agents.”

Christopher Hamer, The Property Ombudsman, said: “This report emphasises the growing importance of the lettings sector for people seeking a home to live in.

“The Government does not see regulation of the sector as a priority and I, therefore, welcome the recommendation of this report that all letting agents should be required to be registered with an ombudsman scheme so that, at least, landlords or tenants can gain redress where they have been disadvantaged by an agent.

“Providing clarity and transparency of fees is also very important. As more and more people become tenants or landlords, these measures would assist them in fully understanding the commitments they are taking on and enable them to challenge the agent if anything is unclear.”

Ian Potter, operations manager at ARLA, said: “It’s vital that consumers have full confidence in lettings agents, and the industry must respond to their concerns about bad practice. That’s why in the absence of regulation, we developed our own licensing scheme.

“All licensed ARLA member letting agents must be covered by a client money protection scheme and hold professional indemnity insurance – which means consumers are protected against negligence. They must follow our strict codes of conduct and have a certain level of training. Ultimately this means that, should something go wrong, there are protection mechanisms in place. We would therefore always advise that consumers use an ARLA-licensed lettings agent.

“Fees will vary from region to region and will depend on the specific services offered by an agent. However, for landlords and tenants alike it is important to obtain clear, written information from an agent about exactly which services their fee includes – and whether there are likely to be any further costs in the future.

“This means that, should a landlord or tenant feel the fees were unclear, they can lodge a complaint with ARLA or utilise the Ombudsman Scheme membership, which all ARLA licensed agents are required to hold.”

The full report is called Renting in the Dark: creating a lettings market that works for tenants, by Louisa Darian. It forms part of the Resolution Foundation’s programme of work on housing.

Comments

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    Lucky Star - your credibility has just been destroyed if you had any. Any personal attack in the context of this article is wholly unnecessary and just vindictive. I certainly wouldn't call the ARLA President a Prima Donna - if you had actually met him you would perhaps have a clue.

    • 12 December 2011 15:28 PM
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    As both a Landlord and consumer writing from personal experience I have found both ARLA and Ian Potter to be aboslutely USELESS. My complaint against a member firm was upheld by ARLA however they then stated that that despite the numerous breaches of their code of practice by the member firm as outlined in their report they were powerless to compel the member firm to carry out any of the recommendations in the report (change of procedures, apology, compensation etc) and then refused to allow the report to be used in legal proceedings making it a complete waste of the 12 months that it actually took for the complaint to be addressed! Is that how Ian Potter expects consumers to have "full confidence in letting agents"? He is an arrogant jobsworth representing an organisation that consists of toothless prima donnas, with his only contribution being to chirp up every time the letting industry is in the media in an attempt to look like they have a role in regulation. ARLA and Ian Potter - the biggest joke in the industry!

    • 09 December 2011 14:58 PM
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    Regarding Ian Potter, operations manager at ARLA and his contribution above.

    He lists various things that ARLA agents comply with such as

    ".... “All licensed ARLA member letting agents must be covered by a client money protection scheme and hold professional indemnity insurance – which means consumers are protected against negligence. They must follow our strict codes of conduct......."

    BUT - do ARLA itself actually have in place a foolproof system that ensures that all ARLA agents comply with those things continuously all of the time?
    If they have exactly what is it?

    • 08 December 2011 11:54 AM
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    @ silver spoon allagents could only form part of regulation if it was done in association with The Property Ombudsman. Like the idea though of allowing consumers to compare agents fees.

    • 08 December 2011 11:18 AM
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    So, everyone should use an ARLA agent should they? Not much esprit de corps there then with their good mates from NAEA , RICS and of course NALS / SAFEagent - total rogues the lot of them! With that corporate edict, difficult to see why they sat on the NALS board for such a long time?
    Anyone who operates as a letting agent who is not an ARLA agent is, of course, not fit for purpose and beneath contempt. Worryingly, that is approximately 90% of the industry.
    Then there is the terminology, firstly they aren't a regulator by any definition and secondly no central body has authorised them to refer to themselves as a 'licensing' authority.
    They are a Trade Association full stop - and don't seem very good at doing that either.
    Rant over - for now

    • 08 December 2011 10:28 AM
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    Bit of a wasted exercise including rent and deposits really as the prices are obviously going to be different. I'm a Manchester agent and can say the average 1 bed price in the city is more like £600, under £500 will be out the outskirts/Salford.

    'Admin' fees etc are an issue, particularly hidden renewal and check out fees. We do display our pricing prominently, it's one our USPs, and do not charge any renewal fees etc as there's simply no need for it.

    • 08 December 2011 10:22 AM
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    HawkEye,
    Totally agree, we all know there isn't 1 leeting agent per town, there is usually a high street full of them, so the question should be Why do tenants and landlords alike use agents that charge high fees.

    If I went to the bakers and they wouldn't tell me the cost of a loaf until I'd agreed to buy it, I certainly wouldn't be buying it.

    ARLA are a waste of time and totally full of their own self belief, if ARLA want the tenants and landlords to use one of there agents so bad why don't they dip in their pockets and market themselves to the public!!

    I have been a letting agent for over 15yrs I refuse to waste my money on a very expensive window sticker, that only my competitors know what it stands for. But then my fees are reasonable, clients money is protected and I'm insured.
    I have never had a landlord or tenant ask if my agency was ARLA, infact I often get asked, "what is ARLA" which just proves a point, the people who it effects the most have no flaming clue who or what it is or does.

    And as ARLA don't monitor the most important things such as Pre-move in work is done, AST's are legal and correct, that safety certs are carried out, that rent is paid to LL on time, that TnT is not harrassed, property inspections are carried out. I am at a loss to know what they do???
    Yes the industry needs to be regulated, but by one unbias general body, not a handful of people who see a way of lining their own pockets by making hard working agents fork out for no return.

    Seems that ARLA are the ones who need regulating, because if my landlords paid £100 odd per year and all I gave them was a window sticker and a newsletter I can guarantee you there would be a linch mob outside my office.

    Rant over, sorry I just see no worth while point to ARLA

    • 08 December 2011 09:34 AM
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    I'll have more to add later as the size of tenant fees charged by agents sometimes makes my eyes water. It is a very dangerous practice that just might cause the Govt to turn over some stones we as an industry would prefer they didn't - but will have brought it on ourselves.

    This is not the first report to comment on the disproportionate size of fees charged to tenants - in 1999 for example Shelter led a campaign on this finding that bedsit licencees were being charged the equivalent of two weeks rent by way of fees. Shelter is bound to lock its weaponry onto this report too.

    Anyway Hawkeye is dead right and this 'walk away and rent from someone else' was my first thought. Apart from anything else it is a requirement to be up front about fees and they have to be published in tenant T&Cs or attached to it by way of a list tariff of them.

    Don't believe me - ask the OFT.

    All any prospective tenant has to do is refer the agent to the local Trading Standards and they'll sort it out.

    Nedless to say some corporates and asset management companies are the worst offenders

    • 08 December 2011 09:23 AM
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    Did anyone notice that that their survey was in partnership with Allagents.co.uk. http://www.resolutionfoundation.org/housing/survey/

    Is it possible for a review site like this to Become a regulator and make agents publish fees online. consumers would then be able to compare agent costs just like other comparison sites do?

    • 08 December 2011 08:59 AM
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    Redress for tenants is there as far as the DPS is concerned as they do not give rats about AST clauses and find in favour of the tenant when it suits them.

    What good will another toothless body do? Zip!

    Anyway it is not compulsory to use a 'cowboy agent' it is all a matter of choice. Got some legs? Then use them. Got a tongue? Ask questions. Dont like it? Walk away and dont moan about it after the event.

    I am one of the cheapest in this town for tenants and when one prospect moaned about my fees I told him to go elsewhere. His complaints would never have stopped and I dont have the time. I hope he was a secret shopper!

    • 08 December 2011 08:45 AM
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    Just what we need arla yet again trying to push for their exorbitant subscription for null return!
    Arla when will you do something for the agents?

    • 08 December 2011 08:20 AM
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