News

Letting agent’s fees – should the government intervene?

By Will Leyland, 26 September 2016

Much has been written in recent months with regards to letting agent’s fees. Broadly spoken about negatively, the fees have raised controversy when charged by unscrupulous agents who use the money to boost profits rather than as a genuine reflection of their costs in preparing tenancy agreements.

This week Citizens Advice have revealed proposals that would see all UK letting agency fees paid by landlords who can shop around, rather than tenants - as is the case in Scotland. However, the issue is complex and often simplistic solutions miss the wider problems facing landlords, agents, and tenants alike.

One suggestion that has been touted by agents and landlords is tighter regulation of agents. Currently the law doesn’t prescribe one overarching regulatory body and, as such, rules and regulation can be vague and difficult for consumers to understand. The law states that all letting agents are required to be members of an approved redress scheme. The leading body for alternative dispute resolution (ADR) currently is the Property Ombudsman Scheme and the leading association of agents is ARLA (Association of Residential Letting Agents).

The issue that many consider to be paramount in tenants being poorly treated is the fact that there is no one prescribed regulatory body setting rules and guidelines for agents. This has lead in many cases to cowboy outfits running services that charge above and beyond the reasonable fees that cover their own costs. The solution, according to reputable agents, is to introduce a powerful regulatory body in the same mould as OFCOM, the communications regulator who oversee legislation and complaints for broadcasters, telecommunications and radio companies. They have been provided powers by the government to set rules and regulations for the industry as well as the power to issue fines for misconduct.

As it stands there are avenues for tenants to pursue should they be subject to unprofessional practices, provided their agents are members of either ARLA or the Ombudsman Service. If their agents aren’t members of these schemes, tenants often have no redress and pursuing any losses becomes complicated and laborious – it is not surprising that many simply give up.

One recurring problem that has been reported from Scotland, where the law has been changed, is that because these costs for agents haven’t disappeared they need to be met somewhere else in the process. The majority in Scotland are passing these costs on to landlords who are now becoming increasingly reluctant to rent to anybody who is looking for short term leases. Not only this, but because of costs involved landlords are also not investing as much money in to their properties and as such the quality of accommodation is now dropping.

Citizens Advice also made a further suggestion which was for agents to put all of their fees into one easy-to-understand cost and agree a consensus among professional letting agents as to the true cost of their fees. This could represent a compromise but would also need to be implemented alongside greater regulation by a recognised government body.

Clarity, transparency and quality should be paramount and reputable letting agents have no problem with greater regulation to enable far superior customer service. Tenants are then able to see fully that the charges passed on to them are reasonable and transparent whilst allowing landlords to invest money to provide greater quality housing. Quality letting agents are in the vast majority and charging appropriate fees – those who are bringing the industry in to disrepute should be answerable to a regulatory body.

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