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Renting roulette: the great letting agents gamble

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Profile photo of Louisa Darian Louisa Darian Policy, Higher Education and Housing
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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of agents using aggressive sales tactics, poor customer service, missing appointments and misleading tenants through out-of-date ads.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
18
John Ward says:
24 November 2012

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].

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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.

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m. says:
28 November 2012

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.

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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.

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AS says:
29 November 2012

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.

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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!

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m. says:
30 November 2012

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.

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Crumbs says:
15 February 2013

Hello.

I am a landlord AND a tenant, and know what a rip-off some letting agents can be from both sides.

Oh, and the letting agent can’t send send someone in the house to fix this and that and charge the landlord, because I would want to know what it is for, and if I was unsure I would send my own people in – I don’t trust them. If I am not sure about a problem I will call the tenant myself, despite paying for full management.

Furthermore, there is no need to charge the tenant ANY agency fee. Why? Because the LANDLORD is already paying for those services! Not all agents charge agency fees, it is just robbery and it should be legislated against.

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Jono says:
6 December 2012

A letting agent is the agent of the landlord, not the tenant. Any work done is therefore done for the landlord. It follows that the duty of care is owed to the landlord, not the tenant. If the letting agent charges the tenant a fee, it follows that the agent is working for the tenant. The agent therefore owes the tenant a duty of care. However, to owe both parties a duty of care must surely indicate a clear conflict of interest, notwithstanding Lord Atkin’s comments in 1934.

Second, if the agent IS acting for the tenant, where is the contract to govern that relationship?

Third, the sorts of costs that are passed on to tenants (inventory, checking in, checking out, and drafting tenancy) are normal legitimate business expenses for a landlord. The landlord can therefore set off the entire cost against tax. The tenant cannot, of course.

Finally, these fees are, in my experience, excessive. £150 plus, a year for a word processed tenancy agreement is simply not acceptable.

Westminster must follow Holyrood’s lead and ban these charges. If a landlord wishes to recover these costs from the tenant, that is his prerogative. The landlord’s choice (whether or not to reflect these costs in the rent) is part of the market mechanism of the rental sector. A landlord who doesn’t reflect these charges will be cheaper and find it easier to get tenants thus giving him more choice but will have to absorb the cost.

These fees are also a disincentive to the agents to optimise their performance. They should be competing on price, efficiency and service. That all agents levy these fees (ie nobody breaks ranks) implies collusion and market abuse or at least market failure.

It remains though that these fees cannot be justified. Which, Shelter and others should be campaigning to have them outlawed.

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Nick says:
15 February 2013

From a landlord’s perspective: Letting agents in London demand ongoing tenant find fees on a declining basis – e.g. fist year 10%, next year 8%, year after 6% and so on. Outside of London the tenant find fee is a one off fee. There is some sort of cartel in London demanding totally unfair tenant find fees.

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Katie says:
9 April 2013

I have been trying to find a property to rent in Southampton and am being quoted between £250 and a whopping £400 in fees alone!!! I have always rented as cannot afford to buy and the maximum I have ever had to pay is £100 and that was only 1.5 yrs ago. I do not understand why tenants have to pay such seemingly random amounts.
Surely it is part of their job and they are, as pointed out in a previous comment, already being paid to do their job by the landlord. It is those who cannot afford to buy that are being penalized and ripped off.
As for trying to get a reduction (as mentioned in another response) HA! too many people now having to rent and competing for property that I would suggest (with experience) that this is not an option.
Something needs to be done ASAP

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J Barrow says:
15 May 2013

I am unfortunately going through the process of renting a property from an estate agent in Dorset by the name of Goadsby. I have a list of the charges now I have decided to take the flat:
Deposit £900.00
rent in advance £600.00
TDS Admin Fee ? What is this £ 30.00
Preparation of requisite legal documentation and inventory charges (inclusive of VAT £148.00
Holding deposit I am now told is none refundable already paid. ” ” £118.00
I thought this deposit should be repaid as I am taking the flat…

I was informed it would be a month in advance and 11/2 x rent deposit, nothing else: I paid for my own bank reference, I took it in to the office, I delivered 2 references myself to the office. A further 2 they collected. All locally available. I would say this is money for nothing it is taking a lot of restraint by me and have politely discussed this amount but we have not got any legal standing. This practice surely needs looking into.. I have asked to meet my landlord but it has been bypassed.. I am a middle aged person, and feel very ripped off by this system… My other biggest gripe is they get £900.00 deposit and the interest… and if I stay in the flat for a long period will wear and tear be an excuse not to give my deposit back if I leave… We need some legislation to cover the unregistered charges these agents are demanding.. Why did I pay because I have to leave my current abode as it is up for sale I needed a home.

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Dave says:
7 June 2013

We’ve just received a letter from our letting agents – Dunhill Property Management – with an invoice for a ‘standard check out fee’ of £100 + VAT.
I’ve never had this before and have checked back through the contract and there’s no mention of it.

Surely if this isn’t agreed upon, they can’t legally charge us this, can they?

On top of this, they want us to have the place professionally cleaned. So what is this check out fee for?
When we moved in, the place was dirty and full of cobwebs. The landlords asked that we hold off moving in sooner because they wanted to clean the place, but it was filthy. Maybe I should’ve charged them a £100+VAT time-wasters fee.

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Stephanie James says:
17 August 2013

My daughter was charged £200 by Sterling Estate Agents for a credit check even though she was paying the whole 12 months rent in advance.

This was not a residential let,it was a tenancy agreement for renting an acre of land and two stables.

This is ludicrous,letting agents are taking advantage of the lax laws governing their charges.

When questioned about the fee their attitude was “no credit check,no rental agreement“

They are ripping off tenants and landlords.

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Duncan Ingram says:
21 February 2014

SHUTTLEWORTHS estates of Bexhil-on-Sea are a prime example. They have admitted to me that all of their local properties are uninhabitable due to a mould problem in the area which they have no intention of doing anything about. They readily employ underhand tactics to disable communications between landlords and agents and place barriers in the way of tenants making reasonable complaints. They do a good job of presenting a profesional facade but are extemely dismissive and rude once they have your business. Left me with no choice but to take legal action over what should have been a fairly straightfoward issue. Absolute cowboys.

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Lisa says:
4 September 2014

When is a deposit not a deposit?

When the landlord wants (3K) for a new fitted kitchen ….so I am taking the wrap for something that was wrong with the propert prior to my tenancy….(no I dont have photographic evidence to prove it) and the waste of space letting agent is siding with the landlord…is this common?

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christopher durant says:
1 February 2016

As a landlord I would never employ an agent. The tenant and the landlord need to know exactly who they are dealing with at all times. We did employ an agent once and the outcome was dire, never again.
All our tenants have our addresses, telephone numbers and email addresses and they contact us direct about problems from blocked drains to problems paying the rent and we deal with these problems. Why would I pay 20% to some business who’s performance I couldn’t monitor and who could block communication between me and the tenant. If I had 10 plus properties I might consider employing somebody to help me look after the tenants and the properties but they would be my employee and responsible directly to me.

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stanleysutcliffe says:
9 May 2017

My wife and I are new to renting a home and were staggered by our first experience of applying for a let.
The estate agent in Halifax, who acted as agent for the landlord, asked us for an £85.00 “Application Fee” for the property. I asked why this was needed if they were looking for tenants and their response was that it is to cover credit searches etc. I asked if we would have to pay the same amount if we were unsuccessful on this occasion and the response was “Yes, for each and every property you apply for”, even though one credit check etc should be enough, surely. I then asked how soon we would get to know if we were successful and was amazed by the agent’s response.
He told me that, as it was a popular property, there were still a dozen or so viewings to take place over the next two weeks and that they would then decide who should be offered the rental. I asked how many applications had been put in besides ours. The agent replied that there were already more than 30.
I couldn’t believe it! I asked if the unsuccessful applicants would get any kind of refund and the agent said “No!”
I said, “So you have collected more than £2650 in application fees when you know there can only be ONE successful applicant. Not only that, you are purposefully recruiting the maximum number of applicants instead of processing them in turn as the applications are made. Following a successful application there would be no need for further applications!”
That agent stated that it was “common practice” in order to give all applicants an equal chance of securing the let!
I see this as a blatant fraud and a money making scam but it seems that it is all perfectly legal.
I do hope that Which? will take up a campaign to stop this criminal like practice as soon as possible!

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