/ Home & Energy, Money

Are letting agents breaking the law on fees?

A picture of a house on a chalkboard

We’ve just mystery shopped letting agents and found that many aren’t being upfront about their fees. We think they’re breaking the law – so how are they getting away with it?

Buying a property remains out of reach for many, so renting has become a fact of life for millions of people. In fact, rental properties currently provide homes to more than 4.7m people in the UK.

When we investigated letting agents last year, we identified upfront fees as one of the biggest concerns for renters. So we’ve undertaken a mystery shop of four branches each of four different agents in London – Foxtons, Barnard Marcus, Martin & Co and Your Move – to see if they were upfront about the fees tenants could expect to face.

Letting fees are clear as mud

Our snapshot research at these letting agents revealed some worrying results. For a start, none of them provided information about fees in any property listings on their sites, on Rightmove.co.uk or after tenants had registered online.

Out of all the branches, only one agent at one Foxtons branch proactively gave fee information to a customer who registered at their branch or called to arrange a viewing. On top of that – not one of our mystery shoppers was provided with a written list of charges.

But even more worryingly – in some cases, our shoppers were either not given fee information when they asked for it, or were not given the correct or complete details.

So how can potential tenants hope to shop around for a letting agent when it’s made so difficult to compare fees? Ultimately, tenants could be vulnerable in this situation – particularly in competitive rental markets like London’s. After all, once you’ve found a property you want, you’re unlikely to let it go, even if it means paying-up for expensive fees.

Unfair and unlawful

As far as we’re concerned, the lack of transparency with letting agents’ fees is not just bad practice – it’s unlawful. We believe that the current failure of letting agents to show fees upfront is a breach of Consumer Protection Regulations, because they are not providing material information in a manner that is clear and timely.

So we’ve written to the four agents listed above to share our findings, demand improvements, and remind them of their legal responsibilities. We want to see increased transparency and an end to hidden fees as we think tenants deserve much better.

Have you had any bad experiences with letting agents? Was your agent upfront about its fees, or did you find yourself facing a hefty bill when you came to sign the contract?

Comments
contractor says:
5 March 2013

its not just tenants who are in the dark about fees.
i work as a contractor doing maintenace work to tenanted properties.
unkown to landlords these agents also charge contractors a introductory fee for finding them work at the properties rented out by them on the landlords behalf. this fee is between 10% & 20%. on both labour and materials. depending on the letting agent.
this fee never shows up on the landlords invoice because of the clever way the agent pays the contractor to conceal their greed.
so come on which dig a little more and expose this scam as well.

James says:
22 April 2013

That is quite an inflammatory statement. I have worked in the industry for 17 years across over 8 different agents none of which added monies on to contractor invoices. While I am sure some do, your blanket comment is basic stereotyping.

Disgruntled contractor says:
12 June 2013

I am also a contractor and am deducted 10% from my invoices, Is this legal or is it just frowned upon within the industry? I have aways been a tad miffed as the agent is already being paid to look after the properties and why should I have to pay them as well, No doubt it would be explained away as admin fees, Nice to know whether I could claim it back,,,

Disgruntled former Tenant says:
18 February 2015

I have just had this done to me as an ex-tenant. This is with a large letting agent, a subsidiary of countrywide; namely Bridgfords in Manchester. After my initial suspicions I called the contractor, who said Bridgfords tell him how big of an invoice to raise, this is then paid in conjunction with 4/5 or more invoices at the end of the month at usually a 20-30% discount rate; the hidden fee being the discrepancy between the amount Bridgfords receive from the tenants deposit and how much they pay the contractor. I am currently not releasing my deposit until this amount is discounted or Bridgfords admit to me they are indeed carrying out the above practice. I would appreciate any support/advice anyone can give in this matter into how to proceed.

In previous housing market downturns estate agents have gone to the wall or rationalised by closing branches and laying-off staff. The massive increase in the private lettings market has effectively sheltered estate agents, the inferior ones especially, from the harsh economic rigours of their trade. In fact they have prospered, since landlords are buying properties and then engaging agents to let them so they make a turn on both sides of the coin. I have no grudge about that as it demonstrates proper commercial astuteness and entrepreneurialism. But, as a consequence, some have become arrogant, exceedingly self-interested, and intensely mercenary. Culturally, estate agents have always been extremely sensitive about their fees [in selling transactions they hide behind percentages and arrange for their fee to be paid by the conveyancer and put on their bill so you never really get to appreciate how much you are paying for the agent’s often feeble performance]. Now they are being secretive in the lettings market, where there is not the comfort cushion of a mortgage and where their customers are often not in such a strong financial position as sellers. “Contractor” above has made a good point about the way agents lick the cream off repair and maintenance work; this is not in the best interests of either their clients [landlords] or the tenants who end up with a lower specification of work since contractors do ultimately need to price this skimming into their bills. The four agents tested by Which? are probably just the thin end of the iceberg, and probably not the worst agents overall [albeit some of the sharpest].

Anon the mouse says:
5 March 2013

If you think agents fees are bad wait until you have to fight over deposit returns. They regard it as THEIR money and will add fees on fees on fees to try and claim it all as theirs.

Anon the mouse says:
5 March 2013

Here’s what happened with “fees” and deposit issues with my former landlord and agent

The agent eventually wanted over £300 which is abit different from their original £60. And funnily enough it only went up when I disputed the checkout list.

My deposit dispute lasted for almost a year, it included attempted fraud by the agents, fees magically appearing, and an ever changing checkout list. On top of the usual never in agent dealing with it. In the end I doorstepped the Landlord and gave her a letter detailing the agents failings and the threat of legal action (benefit claimants get fee relief on small claims, so no loss). I also doorstepped the agent dealing with my case at their head office, funny how they were always available on the phone after that,
All the doorstepping did mean that I organised a meeting between all parties and when it seemed to be heading nowhere pulled out the completed small claims paperwork and asked if court would be better all around. I even offered to file as I don’t pay fees… Apparently CCJ’s really screwup buying property so the landlord was suddenly very receptive.

James says:
22 April 2013

Really, this is what your agents wanted? Contrary to popular belief most agents dread protracted and emotive fights over deposit returns. That role in management often has the highest turnover of staff. It’s an amazingly convenient scenario to paint the agent out as the bad guy. But as I am sure has been pointed out, an agent acts on behalf of the Landlord. Who do you think is actually asking for the deductions to be made? If you don’t like the amount your letting agent is proposing why not write to the Landlord directly. You are entitled to his/her address by law.

Trudy M says:
5 July 2013

We as landlords, have been charged a hidden admin fee of £250 + vat to release the deposit back to the tenants. When I contested this fee we were threatened with court action as we had initially (stupidly) agreed, by email,for the invoice to be sent to ourselves. The fee is reportedly for bringing the records out of archives and processing the release. As we inherited the tenants on purchasing the house, we hadn’t signed a contract with them but agreed, on a good will basis, to allow them to stay until the end of their contract.
We need to see a change in the law to make these unscrupulous agencies accountable.

Dan says:
5 March 2013

It’s true about getting your deposit. They will try anything to hold onto money that they think is theirs. I had mine withheld from me due to a baking tray being “scratched”. In all honesty though I wouldn’t have a clue what the fees are for but I don’t expect anything differently from letting agents.

Anon the mouse says:
5 March 2013

Ask for a clear breakdown and when they put “admin fees” ask for a breakdown of that.

There is a difference between a fee (actual cost + small profit) and a penalty (disproportionate cost), one is legal the other isn’t. If it’s over £20 ask for a breakdown, don’t be afraid to stand your ground. And use their own stuff against them. Use the land registry to get the actual address of your landlord too. Grab a smalls claim pack from court and fill it in. If you get nowhere you know you can file it, and serve the landlord by hand. CCJ’s do scare private landlords as they can’t buy more property easily.

When I took out the lease on my property, I asked at the beginning exactly what fees I’d be looking at. It was all very confusing – they told me I’d pay a deposit of 6 weeks rent, a month’s rent in advance, referencing fees and a ‘checkout fee’ in advance of moving out.

But then, after we agreed to take the property, they asked us for a ‘goodwill’ payment of £200 to hold it. At this point, we’d already paid for referencing (more than £200) – a gesture enough of our willingness to move in, I believed. They couldn’t explain to me why I needed to pay this £200, so in the end I refused and nothing much came of it.

Now I’m trying to exit my contract early in order to buy a property on which we need to move fast. I assumed there’d be an exit fee – which was quoted to us at £500 for a remarketing fee (to advertise for new tenants) and £50 administration fee. Later that same day, I received a call saying that the fee would in fact be £150 for admin. After a string of mixed messages, I’m thoroughly frustrated and frankly, distrusting of my agent.

Anon the mouse says:
5 March 2013

As I said to Dan above anything over £20 in fees ask for a proper breakdown.
Saying £150 admin and proving £150 admin are two completely different things.
You said that you paid for your own referencing so they cannot include finding new tenants in the fee as prospective tenants pay for themselves. Anyone can pull a figure they’d like to receive, proving it is another matter.

James says:
22 April 2013

I presume you mean you wish to break the contract early and these are the fees being levied to allow you to do so. The Landlord is under no obligation to allow early release so you can either remain in the property for the fixed term and pay no fees or leave early and pay towards the landlords costs for finding alternative tenants.

Arnie from Newington says:
5 March 2013

It is industry standard not to advertise agency fees.

However this is not done to conceal information from tenants (who would be told about any fees prior to reserving a property). The reason that fees are not advertised as it may upset landlords who would feel that these fees should go to them or be waived to encourage people to rent their property.

Most landlords would not have a problem with the agency charging these fees however there will always be some landlords who get upset so it is better just not to advertise these fees.

I read the link to the relevant legislation and feel it is a subjective matter as to when a law is broken regarding the timeliness of the disclosure of fees for an agent.

It does though seem that a lot of organisations are currently gunning for letting agents and the issues that are appearing in the press are not new and not that important.

I think the end game for these organisations is more regulation of letting agents and a ban on agency fees for tenants (already happening in Scotland).

More regulation means less more expensive agents (bad for landlords) whilst a ban on agency fees will just lead to higher rents (already happening in Scotland) which is bad for tenants.

Annie

You say that it is industry standard not to advertise agency fees. If letting agents are receiving criticism then honesty and transparency might help.

James says:
22 April 2013

This is slightly misleading. It is industry standard but is more about protecting the business from unscrupulous competitors rather than an attempt to mislead applicants. Any professional business will put in all the hard work to match a tenant with a property only for another agent who has done nothing try and poach the applicants by undercutting fees at any cost. It is exactly the same reason agents will rarely give out fees to a potential Landlord. There will always be an agent working on the basis of undercutting any other agent.

Arnie from Newington says:
5 March 2013

I am very much in favour of honesty and transparency however I think the bodies attacking letting agents have an agenda. I think publishing fees on the website would not appease the critics just as the tenancy deposit legislation hasn’t appeased the critics.

The mystery shopper nonsense makes it sound like letting agents are doing something underhand when letting agents are not hiding that they charge fees.

Given the amount of work involved in letting (far in excess of selling) fees are very low and I would remind which of the difference between an offer and an invitation to treat.

I am not surprised there are critics. Are you happy to buy goods and services without knowing how much they cost? I’m not.

Thankfully, I don’t think I will ever have any dealings with letting agents.

Arnie from Newington says:
6 March 2013

You are misrepresenting my position nobody is asking anyone to buy something without knowing the cost.

The issue is about timing of the information regarding costs rather than trying to conceal information.

Hi Arnie, part of the problem is that our research found that even when our mystery shoppers asked for information on the fees, at times it wasn’t given (for various reasons, such as the agent on the phone ‘not knowing’), or when it was given, it was given inaccurately.

All of this considered, it can be very difficult for potential tenants to know where they stand.

Arnie – My apologies for getting your name wrong.

You claim you are very much in favour of honesty and transparency, yet the industry wants to delay providing information. Please don’t take my comments as a personal criticism. It’s the industry that needs to sort itself out.

kind landlord says:
6 March 2013

I am a landlord and I always try and look after my tenants as I realise that finding the rent money every month is a big burden for many people. I have been paying a considerable amount of money to Lettings agents for many years, but I had no idea that tenants had to pay any money at all,until my daughter rented a Flat! Wow!! What a shock….the Lettings agents are getting fees FROM BOTH SIDES!!!….Pure greed!

Arnie from Newington says:
6 March 2013

Kind landlord

You have my sympathy, when I play football manager I am always annoyed that I have to pay a fee to a players agent to sign that player. I am sure the agent is taking a fee from the player as well.

But seriously charging both sides for services provided is what agents/middle men do (not just letting agents) it is not unusual just life and nothing to do with greed.

Jennifer

As I said before I am not impressed with the mystery shopper excercises that are being carried out. I feel to take such a small sample and extrapolate it misrepresents the true picture. If you went to a football match and the person you sat next to was a racist would you then conclude that all football fans are racist?

We have had mystery shoppers to tell us that letting agents charge fees for referencing in Scotland, mystery shoppers to tell us that letting agents do not accept DSS tenants and now mystery shoppers to tell us that letting agents do not put their fees on websites. Soon we will have mystery shoppers to tell us that the sky is blue and that bears go to the toilet in the woods.

Wavechange

Thanks for your message however I confirm that I took no offence from your comments nor do I mean to cause offence to others it is all just opinions and mine is no better or worse that anyone elses.

Tony says:
7 March 2013

It is interesting to note that the “mystery shop” involved what I would like to think of as well known reputable agents. As a letting agent I am often made aware of less scrupulous back street agents who are quite simply out to rip people (landlords as well as tenants) off, most of whom have no qualifications, little or no experience, no consumer protection and in some cases end up running off with clients money. Which should perhaps concentrate their efforts at this ector of the property market. We do charge what we consider a modest application fee of £195 per property application (to include all prospective tenants). We refund it if the application does not proceed through no fault of the applicant. We do not charge inventory fees, renewal fees etc. Without such a fee we would be subject to considerable messing about by applicants who may submit numerous and ultimately aborted applications on various properties, wasting our time, incurring costs and delaying lets for landlords, who don’t forget are also consumers.

I also note that on the Which website I have the chance of a “Trial” subscription at £1.00 but at that point it does not tell me what my future subscription commitments will be and that they will continue until I cancel. People who live in glass houses…………………….!

One click will provide the monthly price of Which? Magazine and one further click will provide all the information needed about subscriptions.

Thanks for the feedback Tony. On the subscription page if you click ‘full details’ at the top of the page you’ll see: ‘You pay £1 for your first trial month. After your trial month has passed, payments of £9.75 (including VAT) will be automatically requested monthly.’ More importantly, before you choose your payment method it says ‘You’ll only pay £1.00 for your first 1 month. If you continue your membership after the trial, you’ll pay £9.75 per month. You can cancel at anytime.’ I hope that helps.

Tony says:
7 March 2013

Yes – but why not show that information with the initial offer as letting agents are being required to do?

Surely the same principle applies along with lots of other instances of advertsing – it is after all only an “invitation to treat” as has been pointed out.

I certainly agree about the price. Normal price and offer price can very easily be shown together, and always should be.

Tony says:
8 March 2013

Which? seem to be missing (and hopefully not avoiding) my point. If they feel that letting agents should divulge ALL fees etc at the very first point that the consumer sees the information, WHY do they do not do so themselves? Further details of costs etc are not revealed until the second stage in the process which is what most reputable letting agents do already.

Many a time I have been tempted by such offers only to back off when the detail and comitment is revealed further down the line.

Thanks for the comment Tony, I’ll pass on your feedback.

Melissa says:
16 July 2013

Tony, I think you’re the one who has missed the point here. Which? actually do show you quite clearly that it’s for a trial period unlike estate agents who never at any point show you costs, whether that being upfront on their websites or when asking. What you were looking at is called an ‘advertisement banner’ and shows the initial offer, when clicked on it will then take you to a page disclosing more details of the offer. When looking for flats to rent no matter how many times I clicked on places for rent I was never taken to a page that showed any fees. I think maybe you should invest in the Which? guide as it might prove to be useful for someone like yourself.

Tony says:
8 March 2013

You would (rightly) hang us out to dry if we offered a property on something like Rightmove at a “trial” rent of say £200 pcm without mentioning at that first point that it increased to £2000 from month 2 onwards!

Steve says:
8 March 2013

I have several gripes:
I want to rent a flat, and live in it with my (unwaged) wife. Why do I have to pay for a credit search etc. for her (quoted at £200 [ the same as for me]) when I would be the (only) one paying the bills?
How can agents justify fees of this level when (admittedly as ‘individuals’) credit records are available on-line so cheaply?
I was also quoted £300 as a fee, (non-refundable of course), to take the flat ‘off the market’ while my application was processed.
Outrageous!
I understand we need agents (in some form), but, at the moment, they are cynically making money out a commodity people cannot do without; a place to live!

Tony says:
8 March 2013

As an agent I agree with Steve entirely. I suggest that he chooses to rent through an agent that will not rip him off. He might also lobby his MP to introduce mandatory licensing of letting agents, as the professional bodies concerned have been pressing for for some time, which would allow this sort of practice to be controlled.
I cannot understand why successive goverments have failed to take this up although it has to be said that it is pointless if they do not penalise any firm not complying, as seems to be the case with EPC . HMO and Tenancy Deposit rules!

David S says:
8 March 2013

Countrywide, now Bridgfords, during a gap between my tenants, transferred my electricity supply to another provider (E-on) without any permissions. They get a discount for doing so. In a respoonse to my complaint they indicated that the previous tenant did not object. You bet they didn’t, because they weren’t asked – they had already left. And I was certainly not asked,.

I now have a new and patently more honest agency – though left stuck with E-on!

Jeff says:
20 April 2013

I rented with Countrywide some years ago, never again. One day it rained like a monsoon, the brickwork at the front of the house was loose and the rain literally found its way through and flooded half the living room carpet, that is fact. I mentioned this for weeks and weeks to Countrywide, who did nothing whatsoever. Fortunately for me, it was at the end of my tenancy and I left, but I should have been reimbursed for my grief. Had this happened at the beginning of the tenancy I dread to think of the torment I would have had.

Mrs H. says:
8 March 2013

Like the earlier landlord, I had no idea that “fees” are charged to tenants. (I was a landlord for some 14 years). It is reasonable, I suggest, that there is a charge for seeking refs, but that should be a clear, standard charge, from all agents, not variable according to what the agents think they can get away with. It is also, in my (London) experience, the practice for landlord and tenant to share the costs of an in/out inventory. Usually the landlord pays the “in” and the tenant, the “out”. That should be in the contract. The charges are likely to be a bit varied, as different inventory practitioners charge different rates. Agents tend to recommend the same inventory clerks, so should be able to indicate to both landlord and tenant, the probable cost. But these should be the only charges levelled at a tenant. The landlord pays an absurd fee to the letting agency, (mostly only for the introduction of the tenants and a contract, so the agent is on to a nice little earner! These fees and arrangements should be covered by statute. I hope that Which? will give these points serious consideration and include them in their representations to government.

I have only come across one letting agent that was upfront about fees in another town.
Our family was in a vulnerable position when doing the last letting and the agent was fairly opaque about fees, which then looked clearly setup to soak up any optional expenses that they themselves would advise the landlord to not incur. They also forced a longer notice period from the tenant side.
We still went with them as the only other agents in the village are worse, delaying viewings until they have several so they try to make it difficult for tenants to negotiate any maintenance required.

Actually I just saw other people in the forum had the same problem.

So to add, I found that the reference fees are very variable from agency to agency and can run into hundreds of pounds. They get as many adults as possible to go through it so they get as much fees as possible (even when they can tell that the tenants do warrant them). If they then manage to make it into a simpler security check, the fees are still the same. This is clearly setup as a scam (if it wasn’t, they would be clear upfront about credit check fees and distinguish them from contract drawing fees).

James says:
22 April 2013

I am not sure I understand your point. Usually any occupant over the age of 18 will be referenced. This is to avoid issues in future when name tenants vacate and occupants remain in the property causing all manner of difficulties in recovering possession.