Shelter today fired a new salvo on letting agents’ fees for tenants – saying that a ban is perfectly viable in England after having had no ill effects in Scotland.
Renewing its call for a ban on fees in England, Shelter also said the Advertising Standards Authority ruling on transparency is not working.
According to Shelter, its new “landmark” research shows for the first time that the ban in Scotland has had no negative consequences for letting agencies, landlords or tenants.
However, ARLA managing director Ian Potter yesterday told Eye that there was strong evidence of a negative fall-out in Scotland since the ban was legally reinforced 18 months ago.
The research also raised eyebrows among those who say it is an open secret that there is widespread non-compliance with the ban – something not mentioned or apparently even noticed by Shelter.
Potter said: “Agents have gone out of business, some have raised landlords’ fees, some have put up rents. The variations are different depending on strength of market. It is still too early to fully assess the impact.”
Sarah Speirs, a director of the RICS in Scotland, also said the ban could have had a negative impact, particularly as more costly, comprehensive inventories are now required in Scotland following the introduction of mandatory tenancy deposit protection.
Martin McKenzie, of Scotland-based review site Allagents, said: “There have been a few agents that closed down or set up in a different name since the ban.
“However, what is more shocking is that we estimate possibly 25% of firms north of the border are still charging admin fees for tenants at move-in, and a higher proportion still charging ‘other fees’ during the tenancy.”
Shelter said this morning that a ban on letting agent fees in England was essential. It said that earlier research showed that “sky-high fees” were pushing one in four renters into debt.
Its mystery shopping of a year ago found that almost a third of agencies investigated in England charged tenants more than £400 to set up a tenancy, and a further seven (12%) charged more than £700.
In the new study unveiled today, commissioned by Scotland property agent Retties and Shelter, and carried out by research agency BDRC, agents, landlords and tenants were surveyed across Scotland.
It showed that, in the last 12 months:
* The lettings market in Scotland has grown, with a majority of letting agency managers (54%) saying the ban on fees was positive for the sector.
* Nearly 60% of letting agency managers said the ban has had no impact on their business, with 17% saying the change was positive for their business.
* Tenants in Scotland had not reported unexpectedly higher rents than two years ago.
* The majority of landlords who use agents (70%) had not noticed an increase in their fees and fewer than one in five letting agency managers said they increased their fees to landlords.
Shelter also claimed that, despite the Advertising Standards Authority ruling on transparency, “many agents are still failing to disclose fees upfront”.
Roger Harding, Shelter’s director of communications, policy and campaigns, said: “This research shows that charging letting fees to renters is not only unfair but unnecessary, as banning them in Scotland has had a positive effect on the market and renters’ lives.
“Landlords are the real customers of a letting agency, and yet renters are being charged often huge fees for services that landlords are already paying for – something that is unheard of in other industries.
“Putting an end to letting fees to renters is the only way to stop double charging and make the market genuinely transparent.
“Now that we know it can be done without having a negative impact on the lettings market, politicians must take action and stand up for England’s nine million renters, now.”
In Scotland, it has been illegal to charge fees to tenants since 1984. However, the law was widely flouted and was tightened up in November 2012.
In England, the Advertising Standards Authority requires all letting agents to publish its charges to tenants alongside the rent. Last month the Government announced plans to take this further and require all agents to publish a full tariff of fees on their websites and in their offices, or face being fined.
This is due to be enshrined in the Consumer Rights Bill.
Comments (22)
I currently own a small independent estate agent we charge £150 application fee THAT'S IT,, it should be regulated and capped as other agents do charge a lot more with re occurring charges on top . We are here to make sure that landlords get a tenant that can afford the rent . Make the landlord pay and as all my landlords have said they will increase there rent pcm by £5 to £15 . so ban fees it will cause the same sort of problem as the bedroom tax . if they ban tenant fees will buyers who buy a house also have there application fee free ????? errrrr no people who buy a car on a pcp have there acceptance fee as I did £180 errrrrrr no . why don't the government who really want to help do something about a situation instead on passing the blame to some one else I spoke to my local mp who keeps telling me they need to build more houses BUILD THEM THEN instead of spending a huge amount on a train . the government needs landlords, I think landlords should all stand up and have there say. tell the government no housing benefits will no longer be in the private rental sector I know this seems bad but lets see what brain wave they have then as they always have the best ideas .
Landlords cannot simply increase rent because they are hit by an additional cost. Rents are determined by market forces and if they can simply increase rents at their whim why are they not doing it already?
In a deep recession Landlords and Agents have experienced a boom in demand, increasing rents out of sync with all other indicators, the lowest interest rates on record for the longest period of time along with house prices at affordable levels which encouraged Landlords to increase their portfolio.
I maybe missing something but on this basis what is wrong with the Landlord bearing the cost of providing a service to his customer. All other industries have had to weather out the storm at their cost. The only reason he is not bearing these costs is because Agents undercut their fees to get the business and then charge fees to tenants to make up the difference. Its the equivalent of EA undercutting their Vendors fees to get the business and then charge Purchasers fees to cover their costs
yes so it should be stated what we can charge not to just ban the fees
as I say I charge £150 that's it no hidden costs no move in costs no contract costs no tenancy renewal cost . why should the landlord pay for an application if it turns out the tenant carnt rent there property the landlord is down in money the tenant walks away to do the same again if the tenant has to pay a fee they are more carful on what they want
the government will come unstuck in all this as it will start to push away landlords then what will the government do then BUILD MORE HOUSES HAHAHAHA . government needs to play ball wake up in the real world instead of dropping tenancy fees drop vat on rental properties pass the savings on to the tenant
Just a reminder as to what fees Generation Rent & Shelter are complaining about – in the words of the former…
"Before moving into their new home, renters often get hit with spurious fees supposedly covering administration, inventory, references, guarantors, deposit protection, maintenance charges and credit checks. Then letting agents find other excuses to charge more fees, for example when someone moves in or out of a shared house or at the end of a tenancy."
Absolutely right jon@hiea. When we looked at the possibility of losing up to 20% of our earnings if the ban had come into force last month, we were seriously looking at laying off someone to compensate. Not only that but the govt would be down 20% being the lost VAT (can't see them willingly making tenant fees zero-rated!)
Shelters campaign against letting fees within the rental industry is rich. I thought they were a charitable organisation? A quick glance at their website reveals such offers as a book telling me how to play the Housing Benefit system for £35 or a "Bundle" of two books about ******** benefits for the discounted price of £60! Alternatively I can pay a subscription to their online help facility at a cost of £300 pa for 1-5 users!!! Shelter are clearly not a charity!! Surely they should be leading by example and working for FREE as they would have letting agents?? And lets be honest – A high proportion of the type of tenants Shelter 'campaign' for will not be getting a rental property from my business regardless of whether there is a fee involved or not. Perhaps Shelter should build some houses with their book sale profits and let their ex junkie/alcoholic tenants move in for FREE.
This is ludicrous. There is no business that can afford to have between 15 – 25% of it's business wiped out and not look to get it elsewhere. We charge £250 and the government then charges another 20%. Maybe if the government decided not to charge tenants an extra 20% it would be more affordable?
I own a small independent estate agent
if they ban fees it will go from bad worse they should state what you can charge a tenant
=as of people who are buying a house pays application fees
=people buying cars pay acceptance fees
so why should they ban a fee on a private landlord because this will win labour so call votes off tenants
The whole issue remains irrelevant. No one is policing the current rules, so why campaign for new ones? Many agents have no mention of tenant fees on their websites – I saw one yesterday with microscopic text *Fees may apply just under the copyright footer. I am also aware of a friend in a large chain who wrote to the authorities reporting a number of competitors several weeks ago. No response – no change to their practice. Finally – have tenant fees really disappeared from Scotland? There are many tenants who tell a different story.
People in glass houses Eric! I know of one office that doesn't even use micro text to explain its fees. Best have a little audit!
Our 'tenant fee' tab is automated – but if one isn't working, please let me know. Thanks for pointing it out.
@ampersat – you are mistaken by the way – every office has fees displayed. 🙂
in their press adverts too or doesn't that count?
" No one is policing the current rules, so why campaign for new ones?"
Well said!
Get the policing, regulations, redress schemes etc right first. Only then will you be able to enforce changes and most importantly measure and track their effects accurately.
Apparently 40% of agents still do not belong to one of the three redress schemes available. Membership with a scheme should be mandatory for letting agents AND landlords too. Landlords need to be held accountable for their actions also if tenants are to be truly protected.
"Its mystery shopping of a year ago found that almost a third of agencies investigated in England charged tenants more than £400 to set up a tenancy, and a further seven (12%) charged more than £700."
Please bear in mind this is a Shelter statistic, it will therefore be based on a micro sample of somewhere representative like between the two Costa Coffee shops on the 'Clarm' side of Balham High Road. They are about a mile apart provide a great place to meet up at the start and at the end of the research and not having to cross the busy road makes for a much simpler risk assessment. All credit to Shelter though they didn’t sample 100 agents just to help with the complicated maths of working out percentages, this is a massive sample of just 58 Agents. (7 divide by 12, times by 100… a helpful explanation of the calculation for those who went to the same school as the Shelter team)
Genuinely I really do despair!
The report appears to have overlooked the main reason why Agents have gone out of business in Scotland. There is no mention of Agents requiring to lodge all their deposits in a custodial scheme, including all historic deposits. Many had "spent", "invested", or used their tenants deposits to fund their business and therefore had no funds to pay into the deposit scheme.
Bit of a sweeping statement that Neil, when these businesses stopped trading presumably they had to account to the police for the missing funds. Are you saying that none of the tenants wondered where their deposits went and didn't want them back or are you suggesting there is a massive cover up going on whereby multiple businesses have misappropriated funds and it is all being hushed up. It certainly hasn't been on the news.
How about you name 5 firms of the "Many that had "spent", "invested", or used their tenants deposits to fund their business and therefore had no funds to pay into the deposit scheme"
There was no cover up just take a look at all the transactions and businesses for sale at the time. These businesses were purchased for little or nil cost on basis purchaser took over deposits. I was offered a number but too slow in taking them up because the "big" boys swooped in very quickly. Take a look at Countrywide and see who they purchased in Scotland at the time.
Are you claiming that Countrywide have a raft of tenancies where the tenants deposits are missing and are therefore covering up the theft of client monies by the previous business owners? One can't un-steal something by putting it back.Perhaps if you have such evidence you ought to report it to the Rozzers.
I do not think you understand the back ground to Tenant Deposits in Scotland. In simple terms all Landlords and Agents were required to Deposit tenants funds by a prescribed date. Prior to this date those Agents who did not have the funds, to save possible prosecution put their businesses up for sale. They were distressed sales and to get rid of their liability the Agents were selling their businesses for £nil on the basis the purchaser paid and lodged the required deposits.
Its neither illegal or rocket science but a very easy way for cash rich Agents to buy at distressed values. The same would have happened in England but the Government allowed these agents and Landlords to "Insure" their missing deposits
Sorry Neil, this is the strangest story I have ever heard of, big firms buying up crooked firms to replace stolen deposits? no wonder they wanted to clamp down on Scottish Agents, none of that came out in the press.