Lettings agents need more effective regulation

Now that the private rented sector is the second largest tenure in the market, it’s time to make agencies more transparent.

One in four people in Britain feel they have been charged unfair fees by a letting agent according to research published by housing charity Shelter.

The reason the fees were felt to be unfair was that they bore no relationship to the amount of work done by the agent. Tenancy renewal fees are a good example. How much does it cost a letting agent to change the date and print off a new contract to be signed? Can that really be worth £90?

Shelter’s research echoes the findings of a mystery shopping exercisethe Resolution Foundation published last year. We contacted 25 letting agents in London, Manchester and Gloucester, including national and local brands. We found huge variation in the types and levels of fees charged.

Administration fees ranged from £90 to £375. A third of agents charged a tenancy renewal fee, while the rest did not. Some agents charged a separate reference check fee, while others rolled it into the administration fee. The biggest problem for tenants is that most agents don’t tell you what fees they charge upfront on their website so you can’t avoid those who charge the most. And in a market where demand outstrips supply, the option to go elsewhere does not always exist.

The funny thing about letting agents is that they don’t seem to be all that popular with either tenants or landlords. It would be easy to understand a model whereby they worked well for landlords but not for tenants. Yet a lot of larger landlords try not to use them, preferring to find their own tenants. Clearly, this isn’t true of all agents but the growth of websites that allow landlords to rate tenants and vice-versa partly reflects the perceived failings of letting agents.

Industry experts argue that there’s a simple solution. Tenants just need to make sure they only use accredited agents. But with the private rented sector now the second largest tenure in our housing market, it is not clear that self-regulation is enough.

This is not a government that likes regulation, quite the opposite. But there is a case for putting letting agents on the same footing as estate agents to reflect the housing market we now have. This would involve bringing letting agents under the definition of an estate agency with the Estate Agents Act to give the Office of Fair Trading (OFT) the ability to ban agents who act improperly. This is hardly controversial. The industry itself has called for it.

Putting letting agents on an equal footing with estate agents would get rid of the worst parts of the market. At the moment, the OFT could close you down as an estate agent today and you could open up as a letting agent tomorrow. To make the market more transparent for tenants and landlords, so that they know what fees they will incur upfront, agents should be required to be members of an ombudsman service and, as part of membership, to publish their fees in advance and in a comparable form.

The private rented sector is arguably the Cinderella tenure in the housing market. Now that it has overtaken social housing, it is time to focus on making it work better for people who will make it their home for the medium to long term, not simply pass through. Making letting agents fairer and more transparent is just one part of what needs to be done.

Article courtesy of Guardian Blog

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