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.
We have training courses on consumer law from time to time – find out more here.
Rent Rebel says
July 8, 2015 at 7:17 AMLetting agents have been obliged to display fees since 1 Nov 2013. But those found guilty of non-compliance were merely named and shamed on the Advertising Standards Authority’s ‘rogue’s gallery’. (whoop whoop).
As of May 2015, a whopping 18 months later, comes some proper redress. Dishonest agents who charge hidden fees now face a fine, of up to £5000.
Initial evidence suggests that the ASA requirement did little to stop hidden fees. Shelter’s online tool for reporting them was inundated with complaints.
Local authorities are now responsible for investigating renters’ complaints about letting agents fees. They are allowed to keep any fines they levy on agents for failing to publish fees openly – up to £5,000 – so they have a clear incentive to enforce the ruling (but maybe not the capacity…).
The new powers to fine non-compliant agents are unlikely to eliminate the practice either: only an outright ban on letting agent fees will achieve that. Valuable effort and resources must be spent investigating claims – and still we must wait for renters to complain and get shafted before we do anything.
I got most of this from here http://blog.shelter.org.uk/2015/05/do-transparent-fees-mean-better-renting/
Jamie says
July 8, 2015 at 9:41 AMShelter are a lobby group with an obvious bias, so be sure to investigate the opposite view point on tenant fees.
“The new powers to fine non-compliant agents are unlikely to eliminate the practice either”
Agreed. Lack of policing will be an issue and there will always be a minority who fail to comply and it will take a while to filter into general practice. I remember the same situation with EPCs.
“only an outright ban on letting agent fees will achieve that.”
Don’t kid yourself. It hasn’t in Scotland where lots of agents still charge fees to tenants, either openly or via perceived loopholes.
Sandra Savage-Fisher says
July 8, 2015 at 7:15 PMWe completed a checkout for a tenant this morning. The tenant advised us that their new agent had charged them in excess of £300 for fees per tenant (they are sharing a flat with a friend). When they asked what the fees covered they were brushed of as normal charges.
I’ve suggested they perhaps consider raising a complaint. Apparently the fees weren’t displayed on the website nor in the office and couldn’t be explained.
Whilst we charge fees, they are all fully explained and far more reasonable.
7th Guardian says
September 20, 2015 at 10:53 AMWhether it’s transparent or not there is no justification for agents to charge tenants fees. It’s all based on greed. What’s next? Employment agencies following suit?
Rent Rebel says
July 14, 2015 at 1:20 PMJamie, you’re right; agents in Scotland are still charging fees – illegally. Tenants can use this site to help get them back tho. http://www.reclaimyourfees.com/
Agents reluctant to go to court; funnily enough.
New regulation of agents in Scotland is in the pipeline. Eventually, they will stop charging fees; if it means they can’t trade anymore.
HAP Lettings says
August 7, 2015 at 3:08 PMThe new rules make sense for all parties involved. Here’s to a more transparent fee system.
Regards
Josh