/ Home & Energy, Money

Why are letting agent fees so high?

Moving house can be expensive. And for those of us who rent, one of the most significant and annoying costs can be the fees charged by letting agents. It’s even more annoying when it’s hard to find what these are.

I’d love to buy my own place. Sadly I have nowhere near the kind of money needed for a mortgage deposit – especially as I live in what the media loves to describe as ‘house-price-crazy’ London.  So, as I need a roof over my head, I rent.

Which is fine. Except that for many of us it’s hard enough to come up with the deposit to rent a flat – usually six weeks’ rent – let alone cover the admin fees letting agents charge.

We found in 2013 that the average admin and referencing fees (banned in Scotland) you’d have to pay was £310. We also found some tenants could be saddled with check-in and check-out fees, bringing the total closer to an eye watering £600.

A group called Waltham Forest Renters – based in the London borough I’m lucky enough to call home – recently carried out research that found a huge variation in fees. For a two-bedroom flat rented by two people with a guarantor, fees started at £150 and went up to a dizzying £792.

Letting agent fees must now be shown upfront

At least letting agents must now clearly publicise a full tariff of their fees both on their websites and prominently in their offices. But there’s no protection in law for tenants covering what agents can charge.

Since October 2014 letting agents have also been legally required to be a member of one of the three government-approved redress schemes – which have codes of practice agents must follow and act as mediation services. We worked hard to help win this legal change, so we hope tenants (and landlords) will exercise their right to complain about poor service including misleading and unexplained fees.

Any agent who doesn’t display their fees can be fined up to £5,000. The Waltham Forest group’s report claimed that 21 agents in the borough weren’t listing their full fees at the time their research was carried out. They say they’ve passed details of their claims onto the council for further investigation.

But, are the fees reasonable?

This week, the National Housing Federation found that rents in the UK are the highest in Europe and take up the biggest portion of people’s salaries.

And bearing in mind the cost of fees as well, is it any wonder my generation will spend many more years forking out our hard-earned cash in rent rather than saving for a deposit and paying off a mortgage?

Do you think the fees are reasonable? Could fees be levied at landlords as they’re the ones benefitting from the screening of tenants? Or should they be banned like they are in Scotland?

Comments
Member

Would it help more if employers moved from London and the reduction in demand would lower the pressure on rents. And of course staff moving with employers would have more chance of buying their own property. : )

On the specific question from my experience it seems the letting agents are the people trying to extract the most from the system, closely followed by particularly “commercial” landlords.

Is there one on-line forum for people to make their complaints and specifics of charges and unfair practices to be posted? Even deploy a couple of specialist solicitors to take on cases ….

Adam – would you like Which? to do something active in this area

Member

I agree that there is a supply and demand equation at the root of this issue. Certainly the dispersal of more employment away from London would reduce the demand side for housing. It would also relieve many of our other problems but the desire to be centred in London seems to overcome all other considerations. I am sure the government expects that the build-up of pressure will eventually force relocation, but this is not necessarily the case; the pressure is being contained by the market’s ability to adapt itself to the situation.

There’s no question that private sector tenants are having to put up with higher and higher rents in return for less and less floorspace and facilities. Letting agent charges are just another parasitic drain on the market, especially serious if people have to move every year or two. So long as the market absorbs these impacts there will be no incentive for firms to relocate.The only thing that might precipitate relocation is a big hike in employment costs as employees demand higher pay to face rising rents but, again, the tipping point keeps receding. The immediate consequence of the overheated rental market is that we are fast reaching the point when many people in rented accommodation will never, ever, be able to own a property in London or anywhere else [especially now that mortgage rules are much tighter]. Another implication of the high returns to landlords and the agents that act for them is that more and more substandard homes come onto the market as lower-grade property gets converted for letting and this also soaks up some of the demand. Various adverse societal and community outcomes also flow from this scenario and I fear there is also a social problem emerging from the higher density of inner city living [to some extent evidenced in a Which? Conversation on nuisance neighbours].

To answer the questions posed at the end of Adam’s Intro: (i) Letting agent fees are probably not reasonable but they reflect what the market evidently can bear so it’s pure economics and reason doesn’t enter into it; (ii) The fees could be levied on landlords but since they recharge every expense back onto their rentals there would be no gain from doing so and it might actually make things worse; and (iii) Banning just referencing fees [it’s not clear in the article whether this is the only fee banned in Scotland] would be a help, especially in a frequent-turnover market, and unlikely to ricochet back onto rentals at full strength, but if the ban also included admin charges and check-in/check-out fees then I am sure that rents would rise over time to reflect the landlords’ higher costs. It should not be forgotten that managing agents are charging their clients 10%-15% [+VAT] management fees which are also finding their way back into rent levels – do management costs track rent levels so precisely that a percentage is the right formula? Landlords can also hedge a portion of their voids expenses and losses and other defaults into rent levels in a hot rental market like the metropolis.

Member

These fees should be paid by landlords, not by tenants. The landlord receives revenue that can be used to cover these costs; the tenant does not. For sales of homes, the seller pays estate agents’ fees. Why should this principle be any different in the rental market?

It’s all about facilitating a misleading indication of price. If the landlord paid these fees from the rent received, then quoted rents would increase to reflect this. The current system allows the advertised rent of a home to exclude unavoidable fees, which gives a misleading indication of price, one of the most unfair and prevalent unfair commercial practices suffered by consumers.

Member

There is no doubt that the impact of these upfront fees falls on the particular applicant for a tenancy at the time whereas if landlords paid them the cost would be spread across all their tenants some of whom might have been in place for several years without giving rise to any such expenditure. Which way is fairer is a mater of opinion.

Member

John, I see no reason why a landlord would need to cross-subsidise these upfront fees from tenants in other properties they own, if they even have other properties. I am suggesting that landlords should fund these upfront fees from the rent they receive. There is no reason for these fees to fall on the tenant, as they are being incurred at the landlord’s request, for example for credit checks etc.

Member

NFH, the tenant will end up paying for these fees one way or another. So if you ban fees from being charged directly to the tenant, an inflated rent will be used to recover them.

Incidentally, you pay a fee when you take out a mortgage. Can be a couple of thousand to set up. How are these fees justified?

It seems to me that “fees” in the whole of the financial sector are just another money-making exercise that is virtually impossible to control. Perhaps Which? could produce a register of approved agents whose fees are commensurate with the work done?

Member

Agreed but I must say there are tenants out there who are rogues as well. Why not have a system of tenant register. Pay a small fee, prove identity Nat. Insurance and passport No etc. let credit check be done.create on going “tenant file.”Landlord pays small fee to access updated report and provides outgoing report for file + copy to outgoing tenant.

Member

With the average house price in the London now reaching in excess of £400,000, young people hoping to get onto the property ladder has now become just a pipe dream. Mortgage availability favours only those fortunate enough to be able to afford a large deposit from the bank of mom or dad or cash buyers. Part of the problem is caused by wealthy foreign investors cashing in on the UK’s housing market snapping up all available affordable homes and renting them out through letting agents, coupled with the influx of an uncontrolled number of immigrants, leaving young people at the mercy of and exploited by unscrupulous and unregulated landlords.

We are living in an age where regulation has become the norm to prevent the exploitation of honest hardworking people who are being drained of almost every pound they earn through indiscriminate extra fees and fraudulent charges.

The whole housing market is in need of reform to prevent housing associations and private landlords placing unsuitable anti social disruptive tenants next to privately owned homes whose sole intent is to make as much noise as they see fit, scatter their rubbish around for all to see, allow their unruly and undisciplined children to vandalise their neighbours property and neglect to maintain their overgrown and unsightly gardens.

It’s high time for change.

Member

Malcolm, it doesn’t matter so much that “the tenant will end up paying for these fees one way or another”. The point is that advertised rents are kept artificially low by excluding unavoidable fees; this is a misleading indication of price.

If landlords had to pay these fees, then they would choose agents more carefully. Since tenants are commonly paying these fees, it gives no incentive for landlords to shop around for lower fees when deciding an agent through which to let their property. This is in contrast to selling a home, where there is every incentive for vendors to choose an agent carefully. Imagine if the buyer had to pay estate agents’ fees; there would be no incentive for vendors to shop around for a good deal on fees.

Member

NFH, I take your point that if landlords had to pay they would be more choosy. I doubt the majority of landlords would want to handle these themselves – they will want to leave everything in the hands of their agents, wouldn’t they? Hence the potential abuse.

Member

What about banning fees outright like in Scotland? Would this be preferable to charging the landlord or tenant?

Officially the jury is still out on this.

A parliamentary committee under the last government decided that it was up to the next government to assess the impact of banning fees in Scotland on the private rented sector before making any decisions for England.

Member

Adam, without checking the legislation in Scotland, I assume that estate agents can charge fees to landlords, otherwise how do they make their money? Maybe in Scotland such upfront fees are rolled into the monthly management charge that is levied by the estate agent upon the landlord. Can anyone clarify?

Member

As John Ward points out any fees will end up being paid through the rent even if initially levied on the landlord.

The longer we avoid the main problem the worse this situation will get. As diesel alludes to we need to recognise that London and the south east are saturated, so the longer term solution must be to move employment elsewhere. Not only would this spread the housing burden to areas where it is more affordable and more available, it would begin to address the cost of commuting that the southerners (and the taxpayer) put up with.

With fragile governments we are probably living more in hope than expectation, but employers could think for themselves, couldn’t they? I cannot see the attraction of living in London anyway – neither as an environment nor for logistical reasons in these days of communications that do not depend so much upon face to face interaction.

Member

I have to agree Malcolm – it could be good for the county to be less London-centric. But that said, there’s a lot I love about this city, and even with the increasing expense I’d be reluctant to leave.

Just researching for this post found the issue of letting agent fees to be far from just a London & SE issue.

For instance there’s a crackdown on letting agent fee advertising by Trading Standards in Suffolk: http://www.aboutmyarea.co.uk/Suffolk/Sudbury/CO10/News/Local-News/289253-Suffolk-Trading-Standards-Issues-Advice-to-Estate-Agents-and-Letting-Agents

Or here’s a story from Grimsby calling on landlords to take the brunt of the charges : http://www.grimsbytelegraph.co.uk/Calls-landlords-brunt-charges/story-26792624-detail/story.html

Would it be right for landlords to shoulder some of the responsibility for the agency fees as they are able to hold those businesses to account? Will this end the situation in which letting agents charge tenants what they like? Or just result in a rent hike?

Member

I do think NFH’ solution is elegant. With a little tinkering to cover deposits and inventories things could be improved. Just a matter of then educating the owners on how letting agent rip-offs work and building a parallel system so that lettings agents and the owners both get the same message from the tenant.

Essentially a post-box that will screen the owners details , and any invective , from the owner but make sure he is fully aware what is going on with the property.. We would not want any owner to be able to plead ignorance due to agent misbehavious would we. : )

A few rules on response times and mandatory penalties, a few prosecutions. Should solve the problem.!

BTW very recent reaearch just published shows around two-thirds of people polled disapprove of charities having London HQ’s . The next most disliked aspect is charity re-brandings. I guess the general public thinks paying London prices is a waste of charitable funds.

Member

Good point about charities. Their conceited justification for being clustered in London is so that they can more effectively interact and lobby – but at what a cost. They are paying top rentals for [often shabby] office space and higher wages for staff just so they can have the right postcode on their letterhead. If they moved out to some of the small towns around 100 miles from London they would attract better staff at lower rates and save a fortune on overheads. They might even find that their charitable endeavours were more productive into the bargain. Such a move wouldn’t make major inroads into London’s property problems but where one leads others follow. The next time I am chugged in the street I shall ask the pest where the HQ is located.

Member
Amanda Hopkins says:
12 July 2015

I have a tenant who came with the house, which I bought with cash from an inheritance (and which is my pension). She horrified me when she said that the lettings agent the previous landlord had used had required her to travel (with a tiny child and on the bus) to the centre of town twice a year to sign a new assured shorthold tenancy agreement she didn’t actually need in law – and he charged her SEVENTY POUNDS every time for the privilege. SEVENTY POUNDS. Some years later, thinking about it still makes me extremely angry.

During the purchasing proces, the same agent spent some time trying to convince me that letting a house was very difficult and should only be done through a professional, and he also put much pressure on the tenant to persuade me to use him – stuff that!

I’m trying to find a second house, but grow very tired of estate agents rubbing their hands and suggesting rental prices I know are higher – usually around £75 higher (this is in the Midlands) – than changed in the area I’m exploring; but then, the estate agents generally (always?) have a lettings arm, so it’s in their interest to drive the rental costs up and up and up so their percentage is higher.

I don’t mind paying a fair price for an agent to find and do the initial checking out of a tenant, but it needs to be fair, and the agent needs to be required to take adequate responsibility for the thoroughness of the service provided; similarly, a lettings agent who administers the ongoing let also needs to be fair about any charges to both landlord and tenant (or, if you prefer, to both tenant and landlord: both deserve fairness equally), and transparent about all fees, expenses and costs

Without regulation, this will NOT happen.

Member
Renata says:
18 October 2016

hi, I have a problem with my current landlord. We have recently extended our contract (6 month ago) but because of a change in life situation, we had to move before the end of this renewed contract. Unfortunately there is no break clause in the contract, but we agreed with the landlord, they let us go given we replace ourselves with new tenants. We are almost at the end of this process and now the landlord said, they won’t return our deposit, but the new tenants should pay us instead. Is that a legal way?
We have two problems with that: 1. even though the new tenants replace us, they pay higher rent, so their 6 weeks of deposit is different than ours
2. we have paid 8 weeks deposit because we have a dog, which the tenants who replace us won’t have, so they need to pay 6 weeks only

what can we do this case????

Member

It seems that your landlord is prepared to make a concession in your favour so long as you and the ingoing tenants sort it out amongst yourselves. You want to recover eight weeks rental at a lower weekly figure than the ingoing tenants would need to pay for six weeks. You haven’t given any figures to work on so I would suggest that you calculate what you want back, how much the new tenants should be paying for a six week deposit, and split the difference. That way you might end up with a bit less than you wanted and the new tenants might have to pay a bit more than they anticipated [but they can’t move in until you settle this]. If the landlord is short, whichever set of tenants is in surplus should make up the difference. When you’ve done the deal shake hands on it and both write to the landlord to inform them of the settlement, exchanging copies with each other for the record. If you stick to the contractual position you could forfeit your deposit.

Member

Hi
I’m in a weird situation. Hope somebody can help me out.
I moved into this flat (I’ve rented a room) on the 15th September 2016. I’ve got 3 months contract so the tenancy will expire on the 15th December 2016. I’ve already paid in advance the deposit (1 month) and 3 months rent so I don’t have to pay anything else until I will leave.
During this month and a half I’ve been here, few problems came up (such plumbing issues, water in the small area in front of our kitchen where there are the gas-meter to top up). We try to contact the estate agent but he doesn’t answer the phone anymore. He just text us back and we’ve been suggested to contact the agency by e-mail. We contacted the agency by e-mail; they told us that there are not problems that they can solve and they are in contact with the landlord. Basically the agency told us that they can’t do anything.
The problem is that the water from outside it will come inside the flat in few days (if it will rain for 1 day it will be enough…)
In the meantime the agency changed its name (which I don’t think is a good news).
Also, we’ve been told from the previous tenants that the agency doesn’t give the deposit back.
What can I/we do in this case?
Do I have to do something now about my deposit (not protected, or at least I’m not aware of that) or do I wait for the end of the tenancy and then I will chase them to give me the deposit back?
Thank you in advance for your support.

Member

Presumably you have the landlord’s name and address details, Ely, [it is a legal requirement] so I would suggest you contact the landlord direct, formally, in writing, to say what you have posted here and request urgent action to deal with the water ingress problem. Have you spoken to other tenants in the property or are they not affected? You could try speaking to the environmental health department of your local council as they are responsible for the satisfactory condition of rented properties [especially if it is a house in multiple occupation] and would be concerned about water penetration. I think you should contact Citizen’s Advice or a community legal advice service about your legal position given that you have paid all your rent in advance and are worried about the return of your deposit when you leave.

Member
Jason says:
2 December 2016

My tenancy expired and moved out and found out my deposit were not deposited to any tenancy scheme. Our landlord wouldn’t give us our deposit. The landlord which is unfortunately living in Ghana wants the keys of the property and we just don’t know what’s to do. Should we keep the keys until we get our deposit? We paid all the bills and left the house in good condition. Is it possible to sue her even she’s abroad. Any advice would be greatly appreciated. Thanks!

Member

Presumably, Jason, there is no letting agent between you and the owner of the property. I think you should contact Citizen’s Advice or a community legal advice service about your legal position given that you have fulfilled your side of the tenancy agreement and now require the return of your deposit. I would not recommend that you keep the keys for the property until you get your deposit back since you might be exposing yourself to further liabilities if the property was broken into or some damage occurred while it was empty which could jeopardise your deposit. Action such as that could also weaken your legal position. The landlord is almost certain to have a set of keys or would employ a locksmith to enter the property. If there is no agent or other intermediary you might have no alternative but to drop the keys through the letterbox. Citizens’ Advice might be able to suggest some legal restriction that you can put on the property.

Member

We are in the same situation, we left out rental property on 30th October and the landlord didn’t put our deposit into a protection scheme and won’t pay it back. We paid our deposit to a letting agent who passed it on to him and don’t want to know about it – surely they should have overseen it going into a protection scheme? W know he won’t pay it back as while living in the rental property we had credit agencies sending him letters there and they were looking for him!

Member
Paddy D says:
4 February 2017

These articles are all very unclear about what you should do if you are leaving a rented property and your landlord did not put the deposit in a deposit protection scheme and refuses to return it to you. All i keep reading is that the landlord is unable to evict you, there is no information about what you should do if you want to leave. Presumably the solution is to go to court but a lot of landlords dont give out their real address or a business address. More protection is needed

Member

You will see from the previous comments that people in this predicament have been recommended to seek advice from Citizens Advice or a community law service in the first instance. It is not possible through a website such as this to give definitive advice since each case is different and we are not in possession of all the facts.

There are clearly a number of unscrupulous landlords not complying with the law on deposits and giving their names and addresses. Unfortunately they are either managing the property themselves and not using a deposit protection scheme or they have chosen letting agents who shelter them from further enquiries. These are things that any prospective tenant should be checking before entering into a tenancy agreement but many people do not know enough about the privately rented property system to realise that. Letting agents appear to be able to deny all liability for a landlord’s misconduct. It is a wholly unsatisfactory situation but there appears to be no way to enforce the law against absent and delinquent landlords and any attempt would be financially prohibitive.

Member
Mr D says:
4 February 2017

This is such a con, i have a letting agent who was charging £200 to draft the rental contract, the contract i recieved was exactly the same wording as they issued to all their other tennants . The wording was also readily available on line so it was basically £200 to write my name in. There were other fees for referencing , cutting keys etc too !

Member
Aluson says:
19 July 2017

How do I found out were my bond is

Member
ANGELA MADDALENA says:
16 August 2017

How do i get back my security deposit back when the landlord lesely thruston of gainesville, f.l. nor the agents allison and carolyn fields of coldwell banker, east greenwich ,ri ,will not return my calls? The landlord broke the lease befor the one year term was expired
09-01-2016,09-01-2017, i vacated the premises
Of 25 water st east greenwich ,on 07-17-2017, after the landlord decided to put the property up for sale 04-19-2016, i allowed and agreed for coldwell banker to show my living space and have open house with no compensation only
The promise of a successful departure on the behalf of all parties.i would also like to report the agency for fraud.

Member

I think you need advice relevant to American law and tenants’ rights. This site is primarily concerned with consumer affairs in the United Kingdom. There could be some guidance and information on the internet, or you might need to consult a lawyer.Since the property is in Rhode Island I would start in that State but with the owner being in Florida that State might be the appropriate jurisdiction. An expert in American law should be able to advise on that aspect. I hope you resolve your problem quickly.

Member

Angela I read right thru the legal requirements of RI State Law on Tenant/Landlord relationship . RI State Law takes precedence over any other States Law as long as the property is in that state , US Law is unique in many cases to English Law in that each state has its own laws on many matters . In your case I take it you were on a year-to-year lease /rental agreement ? NOT a month-to-month . In that case the landlord RI-State Law is OBLIGED to notify you 3 months in advance by registered letter that you must vacate the premises . IF no damages to the property are found you have the legal right to demand your deposit back via an official State Law way OR the small claims court . For a fuller statement of the facts click on : http://www.brown.edu/Administration/Auxiliary_Housing/documents/LTHandbook.pdf I hope you do well . I personally dont mind answering American questions of ALL sorts as going by Which,s expansion Internationally I do not think its policy is to deny information to any foreign country , especially the USA as quite a few Americans have passed comment here . I take a world view everything , always have and if Which allows will continue to do so. This is all about presenting a positive image not just nationwide but beyond its borders .

Member
Fatosh kalan says:
3 November 2017

Does my landlord have to put my deposit into a scheme on a commercial property , small business?