/ Home & Energy

Renting roulette: the great letting agents gamble

House with gambling counters

Our new research into the lettings market reveals bad practice, unexpected fees and a lack of protection that fails both landlords and tenants. Is renting through a letting agent too much of a gamble?

The private rental sector has grown rapidly over the last 20 years, and now accounts for 4.7m UK households. And two thirds of all private tenancies involve an agent.

Letting agents hold a powerful position within the rental market. From the landlord’s perspective, agents manage a valuable asset; their property. From the tenant’s perspective, agents play an important role in determining the experience of their home.

And yet, anyone can become a letting agent without any qualifications or specific rules about how they handle client money. Only 60% of agents are signed up to a professional body and redress scheme, which makes choosing the right agent a key decision.

Letting agents’ bad practice

However, we’ve found that there’s fairly wide scale poor practice when it comes to letting agents, resulting in both landlords and tenants being vulnerable. The poor practice we uncovered included:

  • Tenants disempowered and dissatisfied: letting agents are ranked second from the bottom in our comparison of markets.
  • Unexpected and unfair fees: we found less than a third of tenants said agents provided information about fees before they asked, and none of the 32 letting agents we looked at had info about tenant fees on their website.
  • Widespread bad practice: we found evidence of agents using aggressive sales tactics, poor customer service, missing appointments and misleading tenants through out-of-date ads.
  • Tenants and landlords losing money: both tenants and landlords were found to have lost money – sometimes thousands of pounds – through agents not passing on rent or unfairly handling deposits.

Despite all of this, tenants and landlords aren’t conducting checks on letting agents. Two thirds of tenants and nearly half of landlords told us they didn’t know whether their agent was signed up to a professional body.

So, we think there needs to be more protection in the lettings market, giving renters the same legal protections as people buying and selling property. That would mean letting agents would have to sign up to an ombudsman scheme and could be banned by the Office of Fair Trading if they break the rules.

And then there are the letting agent fees – these need to be much more transparent. All fees should be included in the headline price and also made clear at the point of sale. Isn’t it about time more was done to protect both tenants and landlords from rogue letting agents?

Comments
Member

This article was going alright until the final paragraph. I would suggest that for “much more transparent” you should say “clearly visible”, for “headline price” you should say “statement of fees, charges and premium payable in advance of tenancy” and for “point of sale” you should say “prior to acceptance of tenancy”.

Otherwise, this is all very good and I think Which? should – in the likely event that nobody else will do anything about it and legislation is pure fantasy at present – produce a letting agents charter with a checklist for prospective tenants and landlords to follow when using an agent. And Which should waive its copyright so that it can be reproduced freely in the property pages of newspapers and magazines [similar to the guidance published in connexion with buying used cars].

Landlords have a free choice of letting agent and presumably go with the one that promises them the most. Tenants on the other hand have to deal with the agent selected by the landlord if they happen to manage the property they wish to rent. I would argue, therefore, that tenants need better protection than landlords do. The burden on tenants from quitting and removing greatly exceeds the upset caused to the landlord if a tenant gives due notice and leaves [despite their constant moaning about it].

Member
Darren says:
26 November 2012

I have been renting with Now! lettings who have decided to sneak in a hidden charge when moving our of my property of £65 for a check out fee. This was not explained to me at all until I requested my deposit back and the letting agent are now trying to take this out of my security/damage deposit. Is this legal? I have written a letter to the agency and advised I will be discussing with the Deposit Protection Service but now the agency have gone quiet and not refunded the uncontested part of the deposit.

Charges like this should be included in the fees at the start of the tenancy. I was also charged £30 in admin fees to protect my deposit in the DPS – which is a free service for landlords and tenants alike.

Member

I have just read this report and am deeply disappointed at what appears to be a biased and dishonest, yes dishonest report by Which.
The report appears to contain misinformation which deliberately seeks to portray lettings agents in a far worse light [ if possible].

I refer to your listing of fees which you have done is such a way as to infer that the agents keep all of this money, and you list such items as a security deposit and advance rental which are not charges or fees, but payments the tenant will pay whether or not they use an agent.
Just how can you portray rental as an agency fee?
ie:-
You have the following in your report
1. Average tenant fees and charges based on one person on a tenancy agreement (Which? mystery shopping investigation, October 2012):
Holding deposit One week’s rent – £400
Administration fee £120 – £420
Deposit administration fee £0 – £29
Deposit 1 month’s rent – 6 weeks’ rent
Rent in advance 1 month’s rent
Credit reference check £43 – £90
Check in fee £0 – £60

The holding deposit is usually the payment of 1 to 2 weeks rent in advance, this secures the property, ensures it is removed from the market and the referencing process is started. This money is deducted from the first months rental… Not a fee or charge. The only proviso is if the prospective tenant presents false references, or is caught trying to obtain the tenancy by deception they will forfeit this money.
Rent in advance, I already mentioned how you can call rent a fee or charge; this is just plain dishonest reporting.
Deposit: Again this is not a fee or charge; this is a refundable security bond.

The situation with dishonest and disreputable agents is already causing issues within the industry without biased inaccurate reporting such as this, whose only purpose seems to be added fuel to the fire without proffering sensible workable solutions. I remind you that a survey of just 32 agencies out of thousands cannot be taken [as you have done] as indicative for the entire industry.

Agents provide a professional service, there are over 2000 pieces of legislation covering the lettings industry, [most designed to protect tenants] which is why a lot of landlords use agencies, most have just 1 or a few properties and are not professional landlords, they are aware that the slightest breach of these regulations can result in heavy fines and need a reputable dedicated agent, just as when you need legal help you go to a solicitor [and if you are unlucky you choose a bad one, but that does not mean all solicitors are bad]. In any other field would you be calling for the abandonment of fees for service rendered, of course not!
We had the same issue with solicitors fees a while back, now they have to list fees beforehand, we had the same issue with pubs, now every pub has to display a price list behind the bar.
This is all that is required from agents. If you walk in and ask how much for the services they provide, and they cannot show you a printed document outlining fees and offer you a written guarantee that the fees agreed up front are the fees you will pay, then walk out and go somewhere else, exactly as you do with any other service.

The agency administration fee should include the following and only the following:-
Contract preparation
Inventory at start and end of tenancy
Credit check
Deposit administration
Office admin
[If there are exceptional or special circumstance fees ie.. pet damage bonds, these must be discussed, listed and agreed up front]

These items are necessary for the protection of the tenant and security of landlord.

The contract:
Self evident, as this is a very powerful legal document, and must be free of rouge clauses and threats to make the tenant pay for the whole period when they wish to legally end the tenancy early.
Inventory:
This is vital for protection on both sides; this can be presented to a court if there is a dispute at the end of the tenancy. This must be done by an outside agency and now include photographs and videos of the property, décor, fixtures, fittings, and any furniture supplied. Inventories can be expensive and the cost should be shared between landlord and tenant.
Credit check:
If the tenant lies about references and status, they can lose their initial holding deposit, many insurers will not give cover if the tenants have not been checked, rent guarantee schemes rely on credit checks, in fact it is very difficult to get a tenancy without one. These checks are not expensive.
Deposit administration:
Again not expensive, this should be a minor charge to cover the time spent and any work done in lodging the deposit, in some schemes there is a charge to the agent for lodging the deposit and they pass this on to the tenant. The DPS custodial scheme is free to use.
Office admin:
The agent would then add a small charge for the rest of the admin involved [calls, letters’ visits etc…]
All other fees such as check in, check out etc… Are spurious and can be classed as rip offs.

I give this as a guide example of a transparent fee structure:

Contract preparation £25 [per contract, not per person]
Inventory at start and end of tenancy; Total cost £250 tenants cost £125 [this is for the property and not per tenant]
Credit check £30 [per person]
Deposit administration £20 [this is calculated as 10% of the total]
Total £200 for a single person renting.

If you walked in and saw this on the office wall, you have 3 choices, Turn around and walk out, agree it seems reasonable and register with the agent [no charge for that], or negotiate a reduction, I have never known a business person [who is still in business] who is unwilling to knock of a couple of quid to get the business. Just remember if you do get a reduction to get it in writing.

I think I have blathered on for long enough, but I would point out one other thing that disturbed me in this report.
Some agencies are still charging viewing fees, this is illegal [and I believe a criminal offence] if anyone knows of any agency doing this please report them.

Member
Crumbs says:
15 February 2013

Why do you charge the tenant these ‘costs’?

As a landlord AND a tenant, I pay fees to the agency as a tenant to cover these ‘costs’ and guess what, I pay again as a landlord to cover these costs.

The tenant should not be paying ANYTHING the the agency. Why? Because that is what the landlord pays for, to pay the agent to market and administer the tenancy. They are charging twice for the same thing, or at least that is what it appears to be.

I think stricter regulation should be in force regarding stinging tenants for these fees because I think it is just because they can.

Member

It might be worth noting examples of good practice in Scotland, like the government’s private landlord registration scheme, recently extended to include letting agents; and the rules about repairing standards here; and some recent campaigns about illegal viewing charges etc.

However, I still get an impression there are too many over-optimistic and inefficient people working in letting agencies, and that membership of a professional association, which should be a given, doesn’t ensure satisfactory performance.

There may also be loopholes in immigration controls, and other anti-social behaviour issues, around student letting, despite the UK Border Agency’s latest iterations around rules for colleges and student visas. As a landlord presented with foreign students making apparently well-founded requests for tenancies, and not wanting to discriminate unfairly against them, I think it would be better if the letting agents could be compelled to do more follow-up on student tenants, beyond looking at their passports and any previous tenancy records; any extra costs for these checks could be fairly placed on the foreign students rather than on the landlords. Similar checks are more likely to be standard practice in other European countries, if only because those countries have identity cards for their own citizens.

Member
SaraJayne says:
30 November 2012

One thing to look at is requiring letting agents to share the landlord’s contact information with the tenant. In our last (rented) home, the letting agent was scamming the landlord out of thousands and us out of weeks of time by sending around someone (related to the letting agent) to “fix” the boiler who did everything in his power to milk money from the landlord. (He replaced every part but the broken one, taking a full month each time to do a 10-minute swap of the broken heat exchange; he never flushed the rust out of the system, so the part continued to break every year for three years in a row. Eventually, he talked the landlord into replacing the whole boiler – and still didn’t flush the rust out of the system).

We were powerless to enlighten the landlord, because we had no contact information for them. It should be included on the lease: “Tenant (contact info) agrees with Letting Agency (contact info) on behalf of Landlord (contact info) … ” At the very least, it should be required that the letting agent pass on the landlord’s contact information. As it is, we didn’t hear from the landlords until they called us telling us that they were fed up of the repair bills so they’d decided to sell the place, and would we like to buy it? (Sure, everyone has a deposit for a property in their back pocket at all times, don’t they?)

Unless it’s legally required, letting agents won’t pass on contact information, fearful that both sides will get fed up of the lousy service and high fees and decide to go private. Besides, it’s unfair that landlords have the contact information for tenants (they certainly have a postal address!), but tenants have absolutely no idea who their landlord is, or how to contact them.

Furthermore, letting agents need to be made to understand that it’s the tenants who pay their wages, so they really should treat us better. They can have all the landlords in the world sign up with them, but if there are no tenants in those properties, the letting agent isn’t making any money. If the tenant up and leaves, there is no more revenue from that property. Our calls need to be taken seriously, and not fobbed off. That said, I know a few people who’ve become landlords for awhile, and they have a similar experience with the letting agents from their side. There’s no excuse for it, and I wish Which luck in combating it – it certainly needs to be done!

Member

Why would anyone rent a property from some anonymous person?
The landlord has engaged the agent to rent the property, the final approval for the tenant lies with the landlord, thus both parties need to be able to communicate with each other.
If an agent refuses to give contact details, this indicates the agent is not 100% trustworthy, so you do not rent that property from them.

In your case it sounds very much as if the ‘gas engineer’ was not qualified, if so the agent and his workman were breaking the law, and the landlord can be held liable.
For anyone in your position go to the land registry, search for your property and it will give the owners details. Contact them and demand they [or a trusted representative if they are overseas] visit before you call the [environmental health / planning dept’ etc…]

In most cases once they turn up and see what the agent is up to, they will thank you.