‘Inflated’ fees give letting agents an incentive to churn tenants – kicking them out, and in the process distorting the whole housing market.
The accusations come from Generation Rent, as it steps up its campaign to get fees banned.
Betsy Dilner, director of the lobbying organisation, said: “By charging inflated fees to tenants, letting agents are also giving themselves a huge incentive to ‘churn’ tenancies by kicking tenants out so the next set can be charged fees. This might be against the interests of landlords as well – who might have been perfectly happy with their tenants staying indefinitely.
“If agents just relied on fees to the landlord and the percentage of the rent they receive, long term tenancies would align with everyone’s interests.”
Writing on City Metric, Dilner said: “If you’ve been unlucky enough to be evicted from, or priced out of a tenancy – and around a quarter of us have – it is another indignity on top of all the others that you now have to pay letting fees just to get the keys.
“Letting agents try to justify these fees in a few ways. “We have our costs too!” they say of photocopying while you need to pack your life into boxes; or, “We’re not singling you out – home owners have to pay fees too!”
“The difference is that those lucky home owners will never be forced to move as long as they keep paying off their mortgage. Even the most conscientious renter never really knows if their landlord will serve them notice, or raise the rent to an unaffordable level. Many tenants paying those fees didn’t want to move in the first place.
“The story of modern renting isn’t living in a house that doesn’t belong to you – it’s living in lots of different houses that don’t belong to you. And paying fees every time.”
She claims some tenants have the opposite problem: they’re desperate to move out of poorly maintained homes, but they’re trapped. The average upfront fees cost a two-adult household around £400, according to Generation Rent research
Dilner goes on: “Fees are actively hindering the efficient operation of the housing market. If we didn’t have fees, more people could move out of squalid flats, forcing landlords to improve their properties.
“Tenants shouldn’t even need to pay fees: they’re not the customer – the landlord is. But tenants are in a bind – they need somewhere to live. As a result, letting agents are free to charge this captive market as much as they can. Our research found that some agents in London charge up to £780 for two people.
“We know tenant fees don’t represent real costs: you can find third parties who charge £20 to conduct a reference while some agents charge £200. Try and charge those fees to landlords and they’ll find a different agent: that gives them a real agency to put downward pressure on fees. Even if fees were passed to tenants in rent they would be significantly reduced.”
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Comments (20)
Jeremy1960 hits the nail on the head, let’s not deliberate anymore. When my overheads reduce down from £22,000 a month then I’ll stop charging tenant fees. Whilst we are on the subject why dont we all stop watching TV, using our iPhones due to the environmental impact and become tree dwellers….
Like trying to find a seat on a train, people manipulate for their own justification..
I think the vast majority of agents would prefer to be out canvassing rather than finding ways to get rid of a tenant in order to earn a couple of hundred quid very little of which would generate profit.
I can’t see many landlords sanctioning evicting a good tenant and risk potential void periods either. In my 30 years in this business, I find these claims unrecognisable. Why would you want to arrange more viewings, pay for more adverts etc and risk an angry client when you have a perfectly good tenant? It also implies that renewal fees have been outlawed – they haven’t. Agents just need to show that they we the effective cause of renewal and work for their fees.
I haven’t seen anyone moaning about Sotheby’s charging a sellers commission and a buyers premium. Most agent’s charges to tenants are at cost level and few make profits for the service, yes service, they provide. Many agents work hard to look after tenants interests too. This kind of ‘announcement’ is immensely unfair on all the professional agents out there many of whom earn very modest incomes. Stereotyping where sensationalism eclipses facts is not productive.
‘Stereotyping where sensationalism eclipses facts is not productive.’
I agree Eric and it makes me wonder why Generation Rent are working so hard against tenants’ interests.
Has anyone got any proof of this? And if so what was done about it? As usual Its open season for any accusation against all agents, but surely there has to be some evidence….
Isnt this a form of ‘ism, lettingism or some such other prejudice against all on the back of supposition against 1 or 2. I demand a new law protecting us!
We have seen clear evidence that tenants’ lobbying organisations were responsible for the JFK assassination and the sinking of Atlantis. The average representative of a tenants’ lobbying organisation spends 5 hours kicking kittens and drowning puppies.
If you think that fees to tenants put them off moving wait until you get rent controls. Tenants will feel trapped in their properties when the current frozen rent they have is so much cheaper than moving to the nicer, newer properties with much higher rents.
I do believe we should have a cap, agencies I have worked for have charged about £60 per person for referenceing and £100 tenancy admin and then check out fee which is third party so not a fee earned and then to re-type or renew a tenancy it was £75 because unfortnaltey yes a fee does need to be paid as an agency has to pay for an administrator or property manager. Some agents have taken it too far and also have hidden fees in their tenancy agreement but it is tenants responsability to read this, but often do not get it until the day of move in. Fees can not be cut all together otherwise youll loose letting agents and just have landlords and tenants working together which never ends well, how many times do you hear stories of private landlords not registering deposits or changing tenants locks and putting thier stuff out on the lawns.
Yawn! When will this lot get real? Landlords decide whether they want a tenant to stay or go, not agents! If a landlord suspected this type of practice I’m sure the landlord would simply just sack the agent!
On another matter, someone mentioned further up the thread that agents/landlords do not simply issue a tenancy agreement nowadays. Issued yesterday to a new tenant:-
* Government right to rent booklet – 8 × A4 colour pages.
* DPS guide for tenants – 6 × colour pages.
* DPS prescribed information – 4 pages
* DPS prescribed information template – 6 pages
* tenancy agreement – 10 pages
* other associated paperwork – 8 x pages.
This after conducting 5 viewings at the property – there were 8 arranged but 3 parties decided not to bother turning up or letting us know to prevent wasted journies/time. Prior to this the property was advertised – do rent a mob realise that when they sit and look for a property on Rightmove that the agent is paying north of £600 a month for that service alone? This month we had 4 properties available equating to c£230 each just to advertise! We actually pay our staff – average salary in our area c£20,000 pa plus office rent £12,000 pa, business rates c£5,000 pa, company cars c£6,000 pa I could go on……..
Do we throw tenants out to earn fees, no we do not, we work on behalf of our landlords!
Assuming there is no law saying otherwise, I suggest you do as I do and email the the tenant these documents on application.
how to rent guide can only be sent by email where you have the “tenants” expressed permission
I have a clause in the application form ‘I agree to recieve all statutory documents via email’ Which they can opt out of – but few do when faced with the line that it will save a rainforest 😉
Jeremy you missed out on the following taking into account a normally worded tenancy and property: (although it maybe covered in the 8 pages of other paper)
Ground 1 and 2 notice
Gas Safety Record
EPC
Electrical Condition Report
Inventory
Copy of headlease
Copy of buildings insurance
Legionella Risk Assessment and control measures
Manuals for electrical appliances
Emergency contact numbers
Strange is it not that all those items you list (very understandably) form part and parcel of the additional costs forced on Landlords by the Government and changes demanded by organisations like Generation Rent and Shelter. When will these people understand that their constant reforms add to costs which are ultimately paid for by the poor old tenant!
It funny the claim that Generation rent are making when tenancies are now running than longer than ever!!! I am not quite sure but I think that the average tenancy is now 23 months. This is just another opportunity for Generation Rent to have a pop at Letting Agencies.
Tessa I get that you are an expert in this field. However I have never met a landlord who would allow his agent to kick out a tenant that he was happy with in an attempt to generate more fee income. This cannot possibly be a widespread practice. Or if it is, it’s not with the landlords knowledge as they incur fees also.
I also note that Dilner claims tenants are trapped because of £400 in fees. With all due respect I suspect the non return of the deposit until after they have left and had to find another deposit on a new property is more likely to trap them than £400 in fees.
Again Generation rent seem to be distorting the matter with their comments or are we supposed to believe that tenants are charged for referencing on tenancy renewals. I do not agree with agents over-charging but set up fees have to be paid somewhere along the line. I see no reason for tenancy renewals to be expensive but thanks to Government legislation and rules it is more than just a tenancy agreement document it may also include dealing the tenancy deposit etc (which of course Generation rent do not bring into the comments) If no fees are charged then it will merely encourage those who are unlikely to pass referencing to apply for tenancies they can’t afford and who will be expected to pay – the landlords together with Council rip off licensing costs in many cases. Ultimately if the market continues to be attacked it will reduce the property available for rent and the tenants will be the people most adversely affected. It is all very well to say these are landlord running costs, they are but are paid somewhere along the line and any running costs will end up being paid by the user of a service.
All of this is because we have an inept Government and an ongoing trend to try to regulate on the basis the Government have NOT tackled the root cause of the problem BUILDING MORE HOMES. This is to deflect interest from the Governments failures whilst they continue to asset strip with “right to buy” giving away a significant amount to public money to BUY VOTES.
Tenancy renewals can be quite complicated although deposits should no longer be a problem, apart from updating the scheme website. You have additional issues such as ensuring you have served the how to rent guide if updated since it was first given, getting permission to re let from the mortgage company and freeholder along with re signing the guarantor. (if one). You may also be dealing with a rent increase negotiation, although this is a benefit for the landlord rather than the tenant.
I know plenty of letting agents who make more from renewals fees than changing tenants. They charge both the landlord and tenant, and get away (unbelievably) with such a charge even when he tenancy becomes periodic. Even worse, they do now of the above in respect of reserving the required paperwork or re seeking the required permissions to lawfully let the property. I do not agree with Generation Rent ultimate aim of banning tenant fees, but the way some agents act, the industry is tarnished badly.
DingDong – don’t forget your additional duty imposed by HM Government to keep a check up on the tenants Right To Rent!!!
I’ve been running a letting agency for 16 years and have never felt the need to renew a tenancy. It seems to me an income generation process.
Agents getting tenants to leave so they can get extra fees is nothing new – I wrote about it here http://www.landlordlawblog.co.uk/2009/07/19/letting-agents-instead-of-renewal-fees/ in 2009.
The article also explains why this practice is in breach of their agency law obligations to landlords (although unfortunately tenants cannot take advantage of this).