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.

Students Hit Hardest By Rent Increases

Recent reports have claimed that the cost of renting has increased across the board but there may be a nasty shock in store for those who have just got their A level results. While the private rental sector has shown increases of 4.3% over the last 12 months, students are now facing rises of up to 25%.

The Royal Institution of Chartered Surveyors (RICS) have claimed that the rise in demand and the increase in private rental charges are down to the scarcity of mortgage products and the situation is only likely to continue in the same manner for the foreseeable future.

In fact, surveyors predict that a similar rise of around 3.9% in rental costs will follow over the course of the next calendar year as the mortgage market continues to be difficult to access.

“While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords,” said Peter Bolton-King, residential director at RICS.

“However, it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.

“These barriers to homeownership need to be addressed alongside the shortage of new stock coming to the market.”

Meanwhile, a further survey has shown that while a student’s weekly rent has risen by 2.4% in the same 12 month period, some areas of the UK have returned increases of around ten times that figure.

The organisation, Accommodation for Students has shown that rents in the North of the country have jumped by alarming rates and they have revealed a 25% increase in Hull over 12 months while Lancaster and Durham have recorded rises of 24% and 20% respectively.

According to Simon Thompson, co-founder of Accommodation for Students, the rises tend to be greater, depending on how desirable the local college or University might be.

“A key factor in determining student rents is the desirability of attending some universities, Mr Thompson said.

“That puts pressure on the accommodation available and, hence, the charging of higher rents. Winchester, Durham, Lancaster, Exeter and Newcastle come into this category.”

In addition, Oxford and Cambridge have experienced obvious increases while the cheapest place for students to rent in the UK is Glamorgan, with an average cost of just £46.00 a week.

The student and private rental markets are completely different entities but both sets of figures show us that the advantages in the current climate are firmly with the UK’s landlords.

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.

Scale of Rental Arrears Revealed

Recent reports have shown just how much of the UK are relying on renting their homes while many of those are facing the prospect of having such an arrangement on a permanent basis. As a financial comparative, it’s widely claimed that renting is more expensive than buying and the struggle to maintain payments seems to be getting worse.

A report generated by Receivers Templeton LPA, who comprise part of the LSL Property Services Group, is suggesting that over 100,000 people across Great Britain are more than two months behind with their rent. This represents a significant increase of 24% compared with a year ago and the numbers are at their highest since 2008.

In addition, the number of eviction court orders for tenants increased by 6% in the first quarter of 2012 and by 5% over the figures declared twelve months ago.

Paul Jardine of Templeton LPA suggested that the rise was, in some part due to the increase in the number of rental contracts but that falling incomes and genuine hardship were significant contributors to the final statistics.

“As the private rented sector grows, the number of tenants in dire financial straits is steadily climbing. Falling wages in real terms have been compounded by rising rents, pushing a greater number of rented households over the edge financially,” Mr Templeton said.

“With the instability in the labour market and wider economy, and public sector cuts still to come, the section of renters in multiple months of arrears is likely to continue its expansion.”

Meanwhile, the Housing Organisation Shelter are claiming that the situation is being compounded by higher rents that are rising towards unaffordable levels.

“This is yet more evidence of the crushing impact rising rents and stagnating wages are having on family finances,” said Shelter’s Kay Boycott.

“Shelter research found that average private rents are now unaffordable for working families in more than half of England, with many paying up to half of their income each month. And with homeownership out of reach for so many, hundreds of thousands of families are beginning to realise renting looks set to be a way of life, not just a temporary stopgap.”

In recent weeks, there have been calls from Shelter and others for the government to look at ways in which they can overhaul the rental sector. The findings from Templeton LPA cannot differentiate between those who are hit by higher rents compared to others who have lost their job or are suffering financial issues due to other factors. Everyone does seem to be agreed however that the statistics can only get worse over the course of the next few months.

Rental Trap or New Way of Life?

In previous weeks, studies and surveys have told us that many families are currently caught up in a rental trap. With the lack of available mortgages and the struggles for first time buyers to raise a deposit for a new property, a significant proportion of potential buyers are having to be patient in the current climate.

However, there are increasing suggestions that this pattern is set to become a permanent way of life for this and possibly future generations. A study by Cambridge University which has been published by The Observer suggests that much of the UK buying public face being locked out of the market for the long term.

In the present day, the survey claims that 35% of the population are homeowners although that figure has dropped from 43% in 1993. It goes on to claim that further decline is set to follow and that as few as 27% of us will own our own homes by the year 2025.

The report indicates that those with families are in the greatest danger of renting for life as they continue to spend over half their income on monthly rental charges. As a result, there is simply no money left to save for a deposit and they remain locked in to the prospect of renting on a permanent basis.

“The worse the economy, the more the likelihood of this group’s housing being in the private rented sector,” the report continues. “In London, if current trends continue, tenants will soon outnumber owners, with important political, social and economic implications.”

The news has been met with resignation in some areas and the housing organisation Shelter says that the government has to recognise that renting has now become a ‘way of life’ for many families. It has gone on to call for major investment in the private rental sector in order to improve standards in all areas.

“This report shows what is fast becoming the new reality of our housing market in the current economic climate: home ownership continuing to fall while renting becomes a way of life for British families,” said Shelter’s Chief Executive Campbell Robb.

“Yet despite the growing pressure on the rental market, the government’s recent housing strategy virtually ignored the sector and did little to address the issues of affordability, stability and quality that so many renters face. It’s time government woke up to the fact that ‘rental Britain’ is here to stay.”

Many of those families would naturally want to retain a hope that they can still move into home ownership and as such, will be hoping that the future isn’t as bleak as the report suggests. As far as Shelter are concerned however, maybe a proportion should really be considering that rental has now become permanent.

Rental Demand Continues to Outstrip Supply

Renting is back in the spotlight this week with the news that more and more homes are being put on the private rental market by owners who simply can’t sell their properties. However, it seems that despite this increase in available homes, demand in the rental sector is still outstripping supply by some considerable margin.

The findings have come from the Association of Residential Letting Agents (Arla) who have noted a significant increase in rental properties that have come on to the market as a result of this scenario.

However, in many cases, the homes remain on the market and this could prove a problem for anyone renting and looking for a long term arrangement.

“Renting is often seen as a low-hassle, lower risk option when compared to purchasing a home, yet many people find the prospect of renting a home daunting, whatever their age or experience,” said Ian Potter, Operations Manager at Arla.

“First time tenants – young or old – should remember to keep the process as focussed and simple as possible. Keeping to some simple guidelines can help tenants navigate the process from property hunting to signing a tenancy agreement.”

The organisation has gone on to provide a series of tips for anyone renting for the very first time and these can be found in full at the website – www.arla.co.uk.

Included in the advice is a tip to research your postcode, which has a great bearing on the price you can expect to pay. Sometimes, even moving a mile away from a certain location will have a favourable effect on your monthly charge so remember to ask a letting agent for advice.

Arla also advise that the lettings industry is unregulated and at present, agents do not have to subscribe to an Ombudsman scheme. However, looking for an agent that is Arla affiliated will help to give you peace of mind.

You should also make sure that your deposit is safeguarded. This is a significant outlay for tenants and by securing it in a scheme such as TDS (the Tenancy Deposit Scheme) you can help to safeguard your money.

Arla also advises to get a proper inventory drawn up and agreed when you move in. This will identify any damage to the home – and its contents if you are renting furnished and will prevent any problems when the time comes to move out again.

Full details of this advice can be found on the Arla website and if you are renting for the first time, it makes sense to follow them and be sure of what you are entering into.

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.”

A Third of Rented Properties are Hazardous

Almost a third of all properties in the private rented sector have major safety hazards according to data released in a Government survey of housing stock in the UK.

The annual English Housing Survey reveals that 28.2% of homes in the private rented sector have what is known as a category 1 hazard.  This is compared to 14.5% of local authority properties, 10.8% of housing association properties and 21.5% of owner-occupied accommodation.

A category 1 hazard is classified by the Housing Health and Safety Rating System and includes any hazard that could cause death, permanent loss of consciousness, lung cancer, the loss of hand and foot, heart attacks, 80% burn injuries, eye disorders and poisoning.

Under the Housing Act 2004, these hazards obligate a local authority to vacate a property of all tenants and to arrange immediate repair and making safe of these hazards.  The most hazardous type of property is flat conversions, with 37.7% having at least one category 1 hazard.  Older properties can also pose more dangers especially those built before 1919.

A total of almost 5 million properties in the UK have such hazards with the most common hazards being those which could cause slips and falls.  Baths, stairs, and showers with inadequate or poorly installed grab rails and handles were the most likely areas to cause issues.

Newspapers recently published a story about how an 85 year old man in Hackney, East London, became stuck in his bath with no heating or food for five days.  Luckily he was able to reach his sink to drink water, but even this suggested the bathroom was too small and not fit for purpose.  The man was only rescued when friends became worried about his whereabouts.

The second largest hazard listed was excess cold and this is especially a problem for those aged 60 or over.  A healthy indoor temperature as at around 21C, but many properties were found to have inadequate heating leading to a serious risk to health.,

The report said: “The percentage rise in deaths in winter is greater in dwellings with low energy efficiency ratings. There is a gradient of risk with age of the property, the risk being greatest in dwellings built before 1850, and lowest in the more energy efficient dwellings built after 1980.”

Other category 1 hazards included biocides, asbestos, lead and radiation, carbon monoxide, and electrical and fire hazards.  Of course, occupier behaviour can also play a major part in the risk these hazards pose and certainly was a factor in over 80% of fires in rented accommodation last year.  However, there were also 2000 fires in the same year associated with faulty wiring and cabling, issues that can be avoided.

All landlords have a duty to protect their tenants and a vested interest in protecting their property investment.  Any category 1 hazards need to be dealt with immediately with tenants vacating the premises if necessary whilst any other reported hazards should be assessed and dealt with as soon as possible or at the very least made safe.

Buy to Let Mortgage Products Soar

Figures released by the Council of Mortgage Lenders (CML) this week reveal a huge spike in the number of Buy to Let Mortgages taken out in 2011 and although they have yet to reach the boom period of 2007, it’s clear that this is a major growth area for the mortgage industry as a whole.

The findings state that overall, the number of loans agreed leapt by 84,000 with the biggest rise appearing in the last three months of the year when 34,800 buy to let mortgages were agreed. Those figures for the final quarter of 2011 represent a significant increase from 26,300 in the same 2010 period.

By comparing these statistics with 2007, when over 93,000 loans were advanced, the rise is thereby put into some perspective but by the end of the year, this type of funding was worth around 13% of the overall market.

Paul Smee of the CML pointed to a number of factors that have contributed to the increase including a static housing market and an increase in demand for rental properties.

‘These figures do not suggest that buy-to-let is crowding out first-time buyers; more that it is performing a really important role within the overall housing market,’ Mr Smee said.

‘The benefits of the availability of good quality, private rented housing should not be overlooked, especially as there are many households which need the flexibility and mobility that the private rented sector is well-placed to provide.’

Industry experts are now predicting steady growth for an area that is something of a shining light among a depressed market. In addition, some commentators have linked the problems involved in finding first time buyer deals to the increase in buy to let mortgages.

‘The buy-to-let sector is one of the few beneficiaries of the current economic climate,’ said Jonathan Samuels of Dragonfly Property Finance.

‘Buy-to-let is being driven by the weakness of the economy and the continued caution of high street lenders at higher LTVs.

‘Consumers are wary about buying and lenders are wary about lending. The result is soaring demand for rental property, which is pushing yields ever higher’

Overall this may seem to be good news for everybody but there is a suggestion that those who are renting in the private sector may become trapped and at the mercy of greedy landlords. With first time buyer mortgages hard to obtain, rent increases may have to be endured.

Matt Hutchinson of spareroom.co.uk concluded with a warning to landlords.

‘Landlords should weigh up the benefits of retaining reliable tenants against the short-term benefits of hiking rents to take advantage of a booming rental market,’ Mr Hutchinson said.

‘The last thing any landlord wants is rental void periods, and if that means holding off imposing rent rises on current tenants, or even dropping the rent a little, then in the longer term that may be a better course of action.’

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Spotlight Shines on 2012 Rental Costs

Property lettings are put under the microscope this week as a survey released by one prominent agent suggests that the costs of renting your home may be dropping. Meanwhile, the survey goes on to suggest that Christmas spending is one of the factors currently having an impact on a rise in late rental payments.

LSL Property Services claim that the average monthly rental payment across the UK in December fell by 0.8% from the previous month. However, LSL go on to state that this still represents an increase of 4% on comparative prices from December 2010.

The fall comes after ten straight months of rental increases, although this does represent a fairly familiar ‘seasonal decrease’.

“The rental market was sheltered from the full impact of the seasonal lull by the strength of underlying tenant demand as many prospective renters took the opportunity to move in the run-up to Christmas at a time when the market is traditionally less competitive,” said David Newnes, director at LSL.

The survey also revealed an increase in late rental payments which it blames squarely on the impact from Christmas spending. The findings suggest that 10.7% of all rental payments were late or unpaid in December, as opposed to a figure of 9.3% from the previous month.

Those figures have prompted the Association of Residential Letting Agents to highlight the difficulties faced by tenants and landlords alike and has reiterated the need for watertight contracts, preferably from a recognised agent.

“It is more critical than ever to take references and conduct thorough research before signing a tenancy agreement,” said Arla’s President Tim Hyatt.

“Seeking advice from a professional, licensed letting agent is the best way to ensure tenants and landlords’ rights are protected.”

The fall in monthly rental prices may be seen by those looking to rent as a positive sign however, industry experts are warning against too much excitement, while affirming their belief that this is no more than a seasonal anomaly.

“It may be premature to say the UK rental market has peaked and that we are about to see rents fall away,” said Matt Hutchinson, director at Spareroom.co.uk.

“What we are probably seeing is a temporary blip, a natural cooling off period for the rental market.”

Overall, rental prices are expected to shortly begin climbing once again while continuing to increase throughout 2012 but the next survey run along similar lines may give us a more telling picture.