Lettings Industry & the consumer – Facts & Fiction

April 1, 2015

This week I managed to irritate the MP for Walthamstow via Twitter following a comment she made on a television program. I didn’t intend to do so, but sometimes you need to make a point. Specifically, Ms Creasey MP suggested agents charged as much as £4000 in tenant fees. It’s not the first time such a claim has been made by others, however it is simply wrong to imply such figures are indicative of industry or even a significant element of the same. You don’t judge a high street banks interest rate on the basis of a loan shark.

Yes, tenants may be asked to pay £4000, but only a small proportion of this represents an agent’s fee. The vast majority of this seemingly sensational amount is the first month’s rent and 4-6 week security deposit which the tenant gets back if they observe the terms of their tenancy agreement.

It may surprise people to learn that I actually support much of what Ms Creasey is doing and what she believes, it’s the approach  with which I am concerned. Labour introduced Tenants Deposit legislation, but refused to ensure that these deposits were paid in to a custodial scheme administered by one of the three providers allowing agents to hold the money themselves in a client’s account. During recession, there is no doubt a few agents dipped in to client’s money and with Governments of both Labour and coalition colours, there was refusal to ensure these agents had Client’s Money Protection (CMP) Insurance which still remains optional. Why won’t someone make it compulsory?

All the calls for standards to improve will fail until existing legislation is policed and enforced. This week, Citizens Advice announced that they want all tenant fees banned because the ASA ruling in 2013 that agents should give clear information about fees has been ignored by large proportion of agents. The flaw in this stance is glaringly obvious; if no one is policing existing rules, who will police new ones? Trading Standards simply do not have the resources and effectively, though unintentionally, allow agents intent on doing wrong to have a commercial advantage over those who invest in compliance, transparency and education.

We were founding members of SAFEagent; a campaign to raise awareness about CMP and to show a clear ‘logo’ denoting which firms have CMP. There are thousands of letting agents who voluntarily subscribe to membership of a professional organisation which require CMP, training, client’s account audits and continuing professional development. This process isn’t cheap and involves a lot of red tape, but agents choose to do it because they believe in improving standards. It’s not a commercial decision, its an ethical one.

One simple solution to improving standards is for landlords & tenants to avoid using agents who do not belong to a CMP scheme, after all, few consumers would book a holiday if a travel operator wasn’t part of ABTA.  Soon, agents will be required by Law to display a tariff of fees in addition to a statement confirming which scheme they belong to and more importantly, if they do not belong to one. If agents are starved of income, they will have to comply and protect consumers or go out of business. Landlords often fail to realise that if a letting agent fails to protect the deposit or misappropriates funds then it is they as Landlord who must repay the deposit even if they have never seen a penny of it. If the deposit was not registered, they may also incur a penalty as the discretion of a Court and will not be able to serve notice to end the tenancy under section 21 of the 1988 Housing Act.

Tenant fees in some cases are undoubtedly too high and costs can be hidden. Tenants should refuse to pay such fees though I appreciate this can be extremely difficult especially considering the lack of stock when someone is desperate to find a home. It isn’t fair that some tenants are effectively blackmailed; however banning fees isn’t the answer. In Scotland, where fees are supposedly banned, many agents still find ways of charging tenants. The Law only prevents an agent charging a fee contingent upon the acquisition of a specific property.

I believe a workable solution to negate hidden charges would be to introduce an amendment which makes it unlawful for an agent to charge any fee which hasn’t been disclosed in writing before the commencement of a tenancy together with a penalty of a multiple of any such fee should they try to impose at a later date a fee which was undisclosed.

I believe that what would be best for consumers is to stop the attacks on an industry where so many have worked extremely hard to improve the treatment of tenants. ARLA, NALS, RICS, UKALA & SAFEagent have all campaigned for improved standards. They have effectively self-regulated yet never get credit for doing so and instead are tarred with the same brush

Ironically, the only people who can actually pass legislation are MP’s and they simply refuse to do so and instead point the finger at the minority of agents who give the industry a bad name. I also believe that if an effective solution is to be found, people from all sides of the debate should work together to starve bad agents of income through consumer awareness.

Make no mistake, I do not know of one professional agent who would resist regulation and many of us are actively trying to change things for the better. It would be foolish to deny there is a bad element to ours or any other industry, but it’s not as endemic as some seem to imply.  I am proud of what so many of my industry colleagues have done voluntarily and make no apology for standing up for the fact that they put commercial differences aside and work together to try and make a difference.

Eric Walker, Managing Director

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