/ Home & Energy, Money

Scotland slams the door on ‘rip-off’ letting agent fees

The Scottish government has ruled that letting agents and landlords shouldn’t charge upfront fees to tenants outside of their deposit. With rents rising and evidence of high fees, should the rest of the UK follow?

After a period of consultation, the Scottish government has confirmed that letting agents and landlords should not be charging tenants any upfront fees outside of the rent and refundable deposit.

This means that it will be illegal in Scotland to charge fees for things like referencing, credit checks or inventory fees. It has always been illegal to charge a premium on top of the rent in Scotland, but there has been confusion about what this meant, leaving agents to continue charging fees.

The Scottish government will make amendments to its renting laws by the end of November to address this problem.

Tenuous tenancy charges

Extra letting agent fees have long been a source of discontent for tenants. In a previous Conversation I highlighted the huge charges some tenants face, such as a £400 in administration fees. When you consider that this often largely involves editing and printing off an agreement, and that the agent may also be charging the landlord for this too, it’s no wonder that many tenants think such charges are a rip-off.

Also, while some agents allow tenants to move on to a rolling contract at the end of a tenancy, others charge another fee of up to £100 just to reprint a revised agreement. Is that really a reasonable and fair fee for tenants to pay?

What about landlords?

While the fees letting agents charge landlords are also a bone of contention – we saw this with the Office of Fair Trading’s investigation into the renewal fees charged by Foxtons – at least landlords have the power to choose who lets their property.

Landlords are buying a service and so they presumably have greater bargaining power in negotiating what they’ll pay. And arguably they should be the ones paying, rather than the tenant.

In contrast, with the vast majority of properties now let through an agent, and a lack of private-rented housing generally, tenants have no choice but to pay up and may end up paying such fees frequently. That’s because the average length of time someone stays in the same private-rented home is one year, compared to 12 years for someone who owns their home. And with many agents not displaying their fees clearly on websites or in adverts, shopping around can be a time-consuming task.

What do you think about letting agent fees? Are they fair or a rip-off? Should the rest of the country follow in Scotland’s footsteps?

Comments
Guest
Geoff Fimister says:
30 August 2012

This should remove a real burden from tenants who generally have no choice but to pay and may already be under financial pressure. It sets an example to the rest of the UK.

Guest

Yes definitely.

Add the cost of 2.5 months rent to all the fees and you can see why agencies are making it more and more difficult for tenants to move. It may not surprise you that landlords are also charged these fees every time a new tenant moves in, plus various others that you haven’t mentioned on here.

Just another example of over-charging when in fact they are just charging it because they can, as everyone else does it

Guest

Yes definitely.
Scotland generally has more laws to protect tenants than England and Wales, as does France and Germany where tenancy is more common than ownership. There is a housing shortage in England, particularly in the South East. This scenario makes tenants tenants ripe for exploitation & they need all the protection they can get.

Guest

NO. The industry need regulation, not destruction!
Of course there are rogue agents, just as there are rogue solicitors, bankers. MPs etc… Why punish a whole industry for the misdeeds of a few?

It is illegal for agents to charge viewing fees, and if an agent refuses to reveal their administration charges, or asks for money up front, the tenant can walk away. No one is forcing a tenant to use a particular agent, but it is advisable to use an genuine, established, professional agent who will generally have fees towards the bottom end and will gladly tell what they are doing to earn it.

The deposit is not a fee, it is security bond returned to the tenant at the end of the tenancy, unless they cause damage or do not pay utility, council tax bills, neither is advance rental a fee.

Tenants need protection as do landlords [there are more bad tenants than bad landlords, but we hear little about them], the reasons for using a lettings agent is because the law is now so complex the majority of tenants and landlords have no idea what their rights and obligations are, the government changes the law on aspects of rental frequently, and many times without informing the industry, or anyone else. They have just altered the ‘Estate agents act’ to allow Tesco & Sainsburys to act as estate agents, by removing the safeguards necessary to protect the public, all without informing the industry.

Tenants need proper legal assured shorthold tenancy agreements, they need deposit protection, they need to be aware of repair obligations, insurance, rights of entry, saftey requirements, licensing for rentals, tenants need professional inventories, many landlords require credit and external reference checks, and tenants need to provide them, the list grows daily. Most landlords are also unaware of the myriad of regulations, and can unknowingly walk into disaster.

All these things take time and cost money, so who is to pay?
The landlord can stand all the tenants costs, and the tenant then changes his mind, or the references are no good and the landlord cannot accept them, why should the landlord pay for this?

And of course If the landlord has to bear all these costs, they will end up tagged them onto the rent anyway.

I would never ever let any of my properties without using my agent, because I just don’t have the time or knowledge to do it properly, just as I would use a solicitor or accountant for legal or financial matters, to do otherwise is courting disaster.

Guest
Kate says:
30 August 2012

@m in reality a tenant is forced to use a particular agent. Renters are basically stuck with whichever agent the landlord of their preferred property opted to sign a contract with. I’m sure I speak for most people when I say I make my decision based on the home I will be living in for 12 months (often picking from a very limited pool) and not the body handling the initial contract. Only once have I been able to choose between two agents both letting the same flat, and funnily enough on that occasion they agreed to waive their fees as a sweetener!

Guest

As a letting agent, I agree fully with the landlord “m” who posted above. Many of those on the other side of the debate believe that agents only work for the landlord, and that all agents are treating tenants badly.We treat our tenants as clients, just as much as our landlords. It’s in the interests of both the landlord and the agent that tenants are happy in the property.

We have only been charging the tenant for referencing, precisely to prevent the problems mentioned by “m”, i.e. prospective tenants changing their mind late in the process or tenants failing our checks. I can guarantee that both of those problems will increase because of what the Scottish Government is doing.

So the loss of fees is not the real problem, it will be the significant additional cost of processing people who fail our checks or who do not take up an offer.

Shelter, as the main campaigners for this change, seem to think we are in the social housing business. Instead of punishing all agents and landlords in the private sector, they should be spending their funds on persuading councils and housing associations to step up to the plate!

Guest

I am in the position of being both a landlord and a tenant. However, I was shocked by the fees I was made to pay as a result of my recent move.

My partner and I had viewed a house we loved and made it clear we’d like to move in. When I rung the agent to let her know, she cheerily said, “that’s fine – can I take your debit card number to hold the property – it’ll cost £280”. Apparently, this was to cover our reference checks, but we had to pay up immediately. As far as I can tell – the checks simply involved emailing our employers and our previous landlord for proof that we had jobs and didn’t cause trouble.

Following that, I probed them further and they admitted we’d have to pay a £180 ‘check out’ fee as well – which is to take a closing inventory of the property when we eventually leave. Apparently you have to pay up-front, as many tenants would leave without paying. So, on top of the 6 weeks rent as a deposit and a month’s rent in advance, we had to fork out £3085 to move into this house. That’s not small change.

I don’t have an issue with the existence of fees per se – but I certainly have an issue with the amount of work that appears to get done in return for them. Our referencing was a breeze and took one afternoon – how can this represent £280 of work? And why are we paying to ‘check out’ from our house anyway? Surely the cost of a closing inventory would be covered in the fees that the landlord has to pay?

Guest

Well Jennifer – unless you are already there, perhaps you should move to Scotland where all those fees will be illegal. Referencing is not quite as straightforward as you suggest – we charge £75, which is more or less at cost, including our time. This will have to stop now, so the landlord will have to pay and rents will rise. So in order to deter people who will fail referencing checks, everybody has to suffer.

Our landlords pay for the inventories, although some agents believe that tenants should pay a share since the inventory helps to protect their deposit against false claims by the landlord/agent.