A major new report out today is urgently calling on the Government to regulate residential Letting Agents to the same standards as Estate Agents and reckons that UK tenants are being ripped off by cowboy agents in the booming PRS rental market.
The Resolution Foundation, an independent think tank which focuses on lower income groups, says tenants are paying 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 there is no compulsory membership of an ombudsman service. The report is also backed by the Property Ombudsman.
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 letting agents must display all charges to tenants and landlords on their website and in adverts in a way that is easily comparable across letting 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.”
Legal 4 Landlords spokesman Sim Sekhon said “Landlords who choose Letting Agents to manage their properties need to ensure that the agents act in a professional manner at all times, working positively for both the landlord and tenant. Landlords can take out insurance to protect their property from a bad tenant but there is currently no protection from a bad lettings agent “.
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