Labour slams government over ‘unscrupulous letting agents’

Letting agent rip offs are under the spotlight once again after new findings from Shelter released this week. In a survey of 5,000 tenants, the organisation found that 23% claimed that they had been unfairly charged by an agent at some point for contract renewals, repeated credit checks and even for viewing a property.

The poll found that the most common complaint was in regard to ‘administration’ – a term which covers a wide range of charges and tends to average at around 14% of the tenant’s property charge. In some cases, this amounted to a non-refundable, one-off fee of up to £540.00.

Typically, a 10% charge would then be applied for an initial credit check and further 8% fees levied for contract renewals. Incredibly, charges for repeated credit checks of up to £150.00 were made while some tenants were even asked to pay £100.00 simply for viewing a property.

“It’s scandalous that some letting agents are creaming off huge profits from the boom in private renting by charging both tenants and landlords fees that are totally out of proportion to the service they provide,” said Kay Boycott, Director of Campaigns, Policy and Communications at Shelter.

Jane Ingram, who is president of the Association of Residential Lettings Agents (ARLA), acknowledged that standards needed to be raised and pointed to her organisation’s repeated requests to the coalition government.

“Standards in the lettings industry do need to be raised. That’s why we have long-called on the Government to act swiftly and introduce a robust licensing system designed to protect consumers,” she said.

The figures have led to an attack on the government by the Labour Party who accused the coalition of standing by and doing nothing while the crisis deepens.

“Unscrupulous lettings agents are ripping off tenants by charging them fees they didn’t know they would face, and exploiting landlords and tenants alike by failing to protect the money they hold for them,” said Jack Dromey MP, the Shadow Housing Minister.

Mr Dromey went on to underline the effect these charges in having at a time when many families are struggling to cope financially.

“As the growing housing crisis and double dip recession put the one million families in the private rented sector under pressure, this is the last thing they need,” he added.

Shelter also found that some agents were double charging their fees to both landlords and tenants while some renters asserted claims that they feel vulnerable in the current climate.

Calls for the government to act are increasing and the only certainty is that this situation will only be repeated until action is taken.

Labour Highlights Issues of ‘Rip-Off’ Letting Fees

The issue of an unregulated private letting industry has hit the headlines on a number of occasions in recent weeks and one of the problems faced by tenants has been highlighted this week by Labour’s Opposition Government.

Hilary Benn, the shadow secretary of state for communities and local government has spoken out over the high charges placed by letting agents and has claimed that some are genuinely ‘ripping off’ landlords and tenants. The numbers in question don’t just relate to commission charges as Labour are also concerned about fees for add-ons such as reference checking and sending renewal letters.

The Labour Party underlined their concerns amidst claims that in 2013, the numbers of homes rented out privately is set to exceed social housing for the first time and their findings suggest that agents’ charges vary to a huge extent.

The charges for reference checking range from a mere £10.00 all the way up to an unnecessarily excessive £275.00 while the charge for renewing a tenancy –  a process which involves sending an e-mail or a letter and asking for it to be signed and returned – varied from £12.00 right up to £220.00.

“What is actually £220 of cost in terms of administration if you had just to send an email, open an envelope, stick it on file?” Asked Mr Benn.

“That seems to me a rip-off. It’s a problem not just for tenants but also for landlords.”

Hilary Benn and his party have promised that they will look into ways in which caps can be introduced in the private sector and this is a move that has been widely welcomed by Landlords and Tenants Groups right across the country.

“Anyone can set themselves up as a letting agent, and then potentially abscond with hundreds of thousands of pounds of people’s cash,” said Ian Fletcher, Director of Policy at the British Property Federation.

“It is therefore counterintuitive that estate agents who handle relatively little cash are regulated, but letting agents who handle lots of cash are not.”

Labour has conceded that part of the problem lies in the fact that the levels of social housing weren’t increased when they were in power. As a result, more and more home seekers are turning to the private rental sector as they are unable to get on to the property ladder and into home ownership.

In the present day, the Labour Party recognise that the private sector is therefore meeting an urgent need and it seems set to press on with finding a solution to any excessive agents’ charges.

Lettings Rise, But Agents Are in the Spotlight

As the uncertainty over the housing market looks set to grind on for much of 2012, the lettings industry as a whole has attracted some unwanted media attention this week with news of a significant rise in the number of complaints against agencies.

In 2011, the number of enquiries received by the property ombudsman rose by 26% from 2010 to 7,641 and this has prompted calls for the whole industry to be reformed and regulated. At present, agents are not obliged to register with a redress system such as the Ombudsman, who feel that making such action compulsory will lead to a rise in standards and a reduction in complaints.

A parallel can be seen from 2007, when Estate Agents were obliged to register with the Property Ombudsman. As a result, it is widely accepted that standards have improved, although a 10% rise in complaints has also been reported for sales agents in 2011.

Ombudsman Christopher Hamer went on to express his dismay that 25% of the lettings related complaints in 2011 were against landlords and agents not registered with the redress scheme and he was therefore powerless to act.

“I am concerned that, for those consumers, they may have little alternative but to undertake potentially costly legal action to pursue their complaint, a daunting prospect in the current financial climate,” Mr Hamer declared.

He also went on to point out how rogue agents, who were unregistered with the scheme were a threat to landlords and tenants alike.

“Knowledgeable landlords already check if an agent has a separate account for client money and has signed up to a redress scheme, before allowing them to market their property,” Mr Hamer added.

“However, landlords who are new to lettings, will no doubt be attracted by lower fees and may not enquire what protection the agent can provide both them and their tenants should problems later occur,” he concluded.

Reports received throughout 2011 claimed a rise both in property rentals and the cost of renting and many agents confirmed that demand was far outstripping supply. That trend seems set to continue for 2012 and therefore the Ombudsman’s reports are a worrying development.

Ian Potter, of the Association of Residential Lettings Agents is one of many who is backing the Ombudsman’s call for a compulsory redress system.

“It was interesting to note that only 10% of those complaints merited adjudication by the Ombudsman, and it should also be noted that there were almost 900 new lettings members despite some consolidation in the industry,” Mr Potter said.

“That said, it comes as very little surprise given there is no national regulation in place to stop rogue agents setting up shop and taking advantage of what is a fragile market.”