Let the right one in: inside the letting agents fees debate
PUBLISHED: 09:00 27 March 2017
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With the government's proposed ban on lettings agents fees still at the consultation stage many young renters feel they can't afford to wait. But is it really worth saving on fees to not get an expert involved?
In a statement last month on the government’s housing white paper, Sajid Javid MP highlighted rising rents, insecure tenancies and unfair agent fees. The report was widely deemed by industry experts as a limp effort to fix the broken property market, but the suggestion of doing away altogether with letting fees stood out.
Chapter four of the white paper states that ‘tenants have no control over these fees because the agent is appointed by and works for the landlord. This is wrong.’ A proposed ban on fees would ‘improve competition in the market and give renters greater clarity and control over what they pay.’
The proposed ban on fees to tenants is still under consultation, pending any legislation being brought to Parliament.
Many renters feel they can’t afford to wait, and the plethora of ways to rent property online has made bypassing agents easier than ever.
Technology savvy young people who are keen to save money can easily become tempted to sideline agents in order to rent direct from a landlord via online platforms and apps, but there may be hidden costs.
Avoiding agency fees has an obvious appeal, but it leaves young renters, who might be less aware of their rights as a tenant, vulnerable.
“After a bad experience renting informally through a friend, I decided to find my new room through an online platform,” says one London renter, aged 24, who wishes to remain anonymous.
“I took over the deposit of the previous tenant by paying them directly into their bank account. Now I’m worried that it might be difficult to get my deposit back when I move. I’d feel more secure if I had gone through an agent, but the fees were too high on top of a six week deposit.”
Affordability is a key problem for young people who are struggling to pay their rent, let alone save money for a home of their own.
This March, Citizens Advice reported that the average deposit needed by a first time buyer reaches £30,000, while average London rents are £15,000 per year.
“Owning a home is a pipedream for many due to the cost of renting privately,” says Gillian Guy, chief executive of Citizens Advice
Citizens Advice and Renters Rights London (RRL) are campaigning for better tenant protection by supporting The Housing (Tenants’ Rights) Bill.
The bill is due to have its second reading in the House of Commons on March 24 and aims to establish a Living Rent Commission with the goal of reducing private sector rents, improving tenants’ terms, and prohibiting agents’ lettings fees. They argue that a ban could help young people save money towards a deposit.
Some agents feel that fees are an important part of paying for the services of an expert.
“We are doing a job,” says Ivan Hrissimov, manager at the Highgate branch of Benham and Reeves Lettings. “If you buy something from Asda, you pay. This is no different.”
Freddie Gershinson, senior lettings negotiator at Glentree believes that banning agency fees could end up costing young tenants more as landlords will simply increase their rents.
“I think a better solution would be to have a cap on such fees to avoid rogue agencies charging exorbitant prices to tenants,” he says.
At Glentree, Gershinson takes extra care when it comes to dealing with younger, less experienced tenants.
“We help them understand the terms and obligations of the tenancy agreement before they sign and commit to the tenancy,” he says.
Not all agents charge fees. “I have long advocated that letting agents’ administration and contract fees to tenants are indefensible,” says Simon Gerrard, managing director at Martyn Gerrard.
“Some agents cut their fees to landlords to attract stock and then simply charge hazily explained admin fees to the tenants to make up the shortfall.”
Shares in Foxtons took a sharp dive immediately after the Chancellor announced his plan to scrap fees in his Autumn Statement, and have continued to fall in the new year. Their business model has traditionally relied on charging high tenants fees and being pushy with sales.
RRL coordinator, Portia Msimang says young people are increasingly put off going through agencies by aggressive sales techniques.
Browsing at leisure eases the pressure on young renters who may feel less able to negotiate with a lettings agent employed by the landlord.
“There are good agents and bad agents,” she says. “At the end of the day they are sales people who can put people under pressure.”
A good agent shouldn’t just go after a sale, though. Gershinson suggests that a reputable agent will enforce checks on the landlord and not just the tenant. Renting via an agent means tenants can be reassured that a landlord is genuine and not illegally subletting a room.
He advises that tenants should find an agent who has been licensed by ARLA Propertymark, formerly known as the Association of Residential Lettings Agents.
Hrissomov echoes the sentiment that ARLA accredited agents are important intermediaries when it comes to landlords, especially those who are renting a property as an ancillary revenue stream.
“They are not professionals so they may not know what’s right and what’s wrong. They aren’t aware of the rules,” he says.
Msimang has seen plenty of cases where tenants renting from inexperienced landlords have run into difficulties.
“They are amateurs and they are not familiar with their responsibilities,” she says. “We as tenants need to arm ourselves.”
Whether renting through either an agent or app, Msimang argues that young tenants are woefully unaware of their rights and are targets for exploitation.
“What we see is a lot of bullying landlords,” she explains, suggesting that women are particularly vulnerable.
When it comes to challenging landlords young tenants don’t have the confidence to contest unfair terms. As a result, they suffer undisclosed charges, unprotected deposits, landlords who allow themselves into the property at all hours of the day and inaccurate inventories.
How then should renters arm themselves against this predicament?
“Always communicate in writing if there’s an issue,” advises Msimang.
Text messages from landlords count as ‘in writing’ and should be saved as screen shots. This is particularly important when renters have a live-in landlord, which excludes them from the rights of a ‘tenant’ as associated with an Assured Shorthold Tenancy.
“Housing is a basic need and human right,” says Msimang. “But who’s got time to go to court when treated poorly, or who wants to?” The answer, she offers, is to be aware of your rights. “The onus is on all of us.”
Know your rights:
Belief: The landlord can let themselves into your home.
Right: Landlords have no right to a key, and must give 24 hours notice of entrance required for repairs.
Belief: Landlords can put up rents whenever they choose.
Right: Rent can only be increased if a new contract stating the new rent is signed.
Belief: Landlords can evict you whenever they like.
Right: Landlords must give two months’ notice. Without a court order, it is a criminal offence to evict a tenant.
Belief: Landlords can keep the deposit.
Right: As of April 2007, landlords are legally bound to place deposits in a government-backed tenancy deposit scheme and give proof of protection within 30 days. If your landlord has not complied with this, you can claim back three times the value of the deposit in court.
Belief: Landlords can deduct money from the deposit for anything.
Right: Landlords cannot deduct money for ‘wear and tear’, only for serious damage.
Belief: You don’t have a right to know who your landlord is.
Right: The person or company to whom you pay rent must provide this information within 21 days of request. You can check it on the Land Registry for £3.
Belief: The agent has nothing to do with my tenancy.
Right: Since 2014, letting agents must belong to an approved redress scheme. If they aren’t they can be fined £5,000.