Recent Changes to Letting Agents Fees

Gradually, regulations are coming into force to protect landlords and tenants from unscrupulous letting agents fees.

Last year all agents (and property managers) had to join one of the three official Property Redress Schemes.

Then on 27 May 2015 the Consumer Rights Act 2015 (section 83 onwards) came into force (in England only) to bring in further rules regarding letting agents fees.

The new rules re letting agents fees

These are intended to create full transparency – so landlords and tenants know exactly how much they will be required to pay before they enter into any form of contract or agreement.

Under the new regulations, agents are required to display details of all their fees, charges or penalties (however expressed) payable to the agent by landlords or tenants for any letting agency or property management work they may do.

The only exceptions are:

• rent payable to a landlord
• tenancy deposits
• fees, charges or penalties which the agent received from a landlord under a tenancy on behalf of another person

These regulations do not apply to landlords, but they do apply to property managers (if you make a charge). Note that it’s not what you call yourself (ie agent or property manager) that matters but what you actually do.

So if you find tenants for a landlord or deal with the management of their property for a fee, you are covered by the regulations. But not if you just publish the advert or provide a way for landlord and tenant to contact each other in response to an advert etc.

Here are some more points to note:

• All figures must be quoted inclusive of VAT
• The fees need to be displayed at all premises where you deal face to face with the public, and the list must be somewhere it is likely to be seen by customers – i.e. they must not have to ask to see it
• It must also be displayed on your website
• There must not be any surcharges or hidden fees, and vague phrases such as ‘administration costs’ must not be used
• It must be clear whether each charge is made per property or per tenant
• If the fee cannot reasonably be determined in advance you…
• must describe how it will be calculated
• There is no legislation on what an agent actually charges as this is a commercial decision for each agent to take
• You can split charges between landlords and tenants if the tenant will benefit from them – for example drafting a tenancy agreement or the charges for getting an inventory done. Needless to say there should not be any duplication of charges
• You must also publicise whether you are members of a client money protection scheme and
• Say which Redress Scheme you belong to

These new rules are in addition to guidance published by the Advertising Standards Authority and any other relevant consumer regulations

Help from ARLA

ARLA have an information page here and have also created templates for ARLA members to use to display your charges.

Even if you are not an ARLA member it is a good idea to follow the form of their templates as they have been designed to ensure that you are compliant. You can see the templates here.

Enforcement issues

The new rules will be enforced by Local Authority Trading Standards, who can impose a fine of up to £5,000, although they have to give you written notice first and there is a procedure they have to follow.

Worryingly however it looks as if these rules may, in some areas, not be vigorously enforced as this Property Industry Eye post shows. Indeed, an earlier post showed that cash-strapped Trading Standards put supervision of letting agents below take-away restaurants, animal health and secondhand cars.

It is to be hoped though that this negative attitude will not prevail. In any event agents wanting to avoid prosecution and fines should ensure that they are compliant now.

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