There is little doubt our industry is under attack from all sides.
The motives are many, but I can’t help feeling that with the shift from home ownership to the PRS, votes feature heavily.
It’s good PR for our detractors. We are a soft target as few have sympathy for what are perceived as rich landlords and avaricious letting agents. Most fail to realise how hard it is for an agent to actually make money.
If agents don’t fairly charge for the service they actually provide, the brutal truth is that some will close, whilst for others clients’ money becomes increasingly tempting.
Tragically, the aggressors mistakenly believe or ignore the fact that the ultimate losers will be the tenants for whom they claim to campaign.
We as an industry have a window of opportunity to address this before draconian measures are imposed upon us.
I believe most agents are fair and pass on costs incurred, but there remains a number of agents who use tenant fees as an income stream to subsidise fees designed to undercut competitors at the expense of tenants.
To combat this, I believe we need to focus upon two key issues.
Firstly, I absolutely agree with and welcome the NALS initiative – fees need to be capped. This cap needs to be realistic and equitable and whatever figure is agreed must represent the total amount a tenant will pay for the duration of their tenancy.
Secondly, a mechanism should be put in place to prevent agents from imposing additional fees at a later date. Trading standards simply do not have the resources to police this so another solution must be found. The best policing would be the tenants themselves, but consumer awareness is tough to achieve.
I was thinking about the PPI scandal. I wasn’t particularly interested when this story broke as I knew little about PPI.
Then I saw adverts telling me I could get a couple of thousand pounds by filling in a form. Many of my friends talked of their successes and the claims propagated. This of course was cure rather than prevention, but nevertheless, there is a lesson in this. If you incentivise victims, they become motivated. If it costs the perpetrator, they stop doing it.
Failure to protect deposits is another example, as was the largely successful simple campaign for HMOs: ‘No licence – No rent.’
How could we achieve this? Give tenants a mandate to police agents. For example, if an agent fails to disclose a fee prior to the commencement of the tenancy, or exceeds the agreed cap, the tenant should be able to claim a multiple of that undisclosed charge with a simple action through the small claims court and without further burdening trading standards’ limited resources.
It wouldn’t be complicated. Send ‘Money Claim Online’ a copy of the agent’s fee disclosure and a copy of any subsequent undisclosed charge. Even the most roguish agent would think twice.
The process could be added to the ‘How to Rent’ booklet and promoted through industry bodies and DCLG, universities, local authorities and tenant groups. It would also demonstrate to Shelter, Generation Rent, Government and opposition that the industry cares about tenants and compensates those treated unfairly.
It would also promote transparency and clarify what a tenant fee actually is rather than mislead people by including deposits and advance rental payment in their headlines.
You may disagree, but it’s just an idea. We need ideas, as pressure is building and doing nothing is not an option.
It would be great if the industry took the initiative before it’s taken from us.
* Eric Walker is managing director of Northwood
Comments (10)
OK, we are over complicating things here. The legislation said we need to disclose our fees. Currently as far as the portals go we aren’t. Applicants can look at the rents and then they have to individually log on to every agents fee disclosure to attempt to work out what it might cost them to move – this is not good practice, surely.
Why not have a system where a tenant needs to input some very basic information into a portal, then a portal works out the moving costs for that tenant, depending how many people in their family and puts that information on the search page.
I can see the logic in this, but I’m not sure how that would work if a property was listed with more than one agent, and/or how likely agents are to put their fees into portal sites when many aren’t listing them on their own websites (the latter at the demand of the Consumer Rights Act, no less).
surely ARLA should be the main catalyst in some form of fee capping initiative …TBH, probably asking a bit much of a pretty dire organisation.
totally agree on some form of capping along with an obligation to have no more than three fees listed (rather than the plethora of fees some agents charge/list)
on a slightly different subject, I note the TPO have clarified in their revised code of practice for lettings agents, an obligation to inform the landlord client immediately of ANY monies earned from a third party whereby a tenant has used their services. I assume this relates to insurance or more commonly utility services.
I’m not surprised tenant fees are a hot topic, how some agents can charge what they do is beyond me, especially when a tenant has no other choice than to use that agent if they want that property.
Who in their right mind can charge £360 for ‘amending a tenancy’ when lets face it, it’s probably a word document and will probably take them 2 minutes to change a date or figure.
It’s crazy
There will be no ban on tenant fees from a Tory government.
Wish I had your confidence. We have an anti landlord government pandering to the majority for votes so they can retain power.
Companies such as FCC Paragon and Rentguard etc all have very similar processes. Why not have each tenant referencing company charge the same amount per person, so for example £30(Inc vat) and each agent that does their own references charge the same. But for it to work referencing companies must also cap their fees.
All other administration fees are then capped and inserted as standard into an AST as well an agents website and on the wall of their office with guidelines/rules set out by a regulator as to what an agent is able to charge for and how much they can charge.
This is long overdue.
We could simply builda system that retains and pays the fee to the successful letting agent but that ensure a tenant only pays one set of proportionate fees.
The understandable pressure on fees is coming from high demand areas where rogues flourish, cutting off the lifeblood of roguery and starving the crooks out of the industry is a quicker and more effective survival strategy than trying to fight career politicians and envious malcontents who won’t see good in our industry no matter what we do.
I share Erics’ fears, supported this idea at the TPO conference and do so again here. There cannot be arbitrary charging caps as this interferes with a properly functioning free market and policing of the industry as a whole needs a massive overhaul.
I would question how free the market actually is though.
It is very unusual for properties, certainly in my area, to be listed by more than one Agent, quite rightly too in my opinion, but that effectively then gives the Agent carte blanche to set what fee they like. I have even spoken to Landlords who say they like Agents that have high Tenants’ fees (not, they say, because the Landlord fees are cheaper, though I suspect that does help enormously! – but because it shows the Tenant is serious and can easily afford the rent – until I point out that if the Agent’s weren’t charging such high fees they could probably afford more rent!!)
Tenants being able to report fees that have been charged without prior advertising will not alter the fact that, to charge the exorbitant fee, all the Agent has to do is comply with the current regulations and advise the applicant before signing the tenancy.
Only charging fees to a Tenant for a service that benefits the Tenant and capping those fees is the only way forwards.