Not all letting agents are totally opposed to Shelter’s ‘Letting Away With It’ campaign against fees charged to tenants by letting agents.
But it is not so much the question as to whether agents should charge fees, but the sheer amounts.
With Shelter having won its fee battle in Scotland and now gathering information in England, is this an issue that high street letting agents south of the border should address?
In today’s blog, independent agent John McCusker rounds up the situation and shares his thoughts. His agency does charge some fees, but he supports the Shelter campaign.
His firm charges landlords a percentage fee; tenants are charged a one-off fee for referencing, credit and bank checks, plus an inventory check in and check out fee. Landldords and tenants are not chrged for drawing up ASTs, admin, repeat credit checks, lease renewals or viewings.
Comments
Who pays for 'failed' credit checks?
The customer pays for failed checks. Agents and landlords will not accept a tenancy application unless money for the check is paid up front and, before you ask, that will be with a mark up for services rendered and the total is non refundable.
In other words there is no difference in the arrangements for a pass or a fail.
Who pays for 'failed' credit checks?
@Hawkeye
I am well aware of what is needed tenant wise and Guarantor in terms of LERG cover for a Landlord.
Whjy does everyone persist with comparisons of other things. If someone is buying a leasehold flat they are buying a leasehold flat and pay the fees and charges accordingly - or they don't proceed.
Same with mortgages I agree initial fees are obscene. But they are not illegal and no-one has to buy them because they do not have to take the mortgage from that lender.
We are talking here about fees charged to tenants, whether they should be or whether the Landlord should pay them. It's a complex enough problem as it is, so let's stick to it.
@IO because that was last week and this week the tenant may be up before the beak with something massive. Of course they have to be checked as it comes back to insurance - no credit check - no insurance. Does'nt anyone read the small print?
Regarding the charge to ANY tenant - what about leasehold flats that someone is buying, do they get to pay no fees or is this one rule for me and another one for you?
ANALASYS PLEASE
@AO How stupid of agents to offer a free service. Anyone not prepared to pay my fee is shown the door as my fees are competative where my office is. Why come to work and lose money I can do that easier at home.
@Ray E if a tenant makes an offer (or a buyer for that matter) makes an offer my question before putting said offer forward is 'if this is accepted will you take/buy the property'. With the answer I think so. 'I say when you know so I will put it forward as I do not want to buld by clents hopes up only to have them dashed'
I am more than a bit confused by all this. An agent's 'customer' is not a tenant until they have passed all the referencing checks and have been accepted by a landlord.
If the agent is introducing a reliable customer to a landlord then why shouldn't the agent charge the customer (who is not yet a tenant). The agent does not want to waste their time and money, the landlord's time and the customer's time if the customer is not going to be acceptable as a tenant.
If the landlord is finding their own future tenant then it will be the landlord who makes the charge but, even so, the customer is not a tenant until the contract is signed.
In both the above cases the customer may fail the checks and have to walk away without ever becoming a tenant. In this case the customer should seriously think about their own situation and not waste any more of their money.
A letting agent may considerably help a letting customer by referencing them only once when they are in fact choosing a property from one of several landlords who have vacancies. In this case the customer would benefit if their first choice on landlord refused them. If landlords have to do the referencing then customers would get hit with every application made.
I have just taken over a house previously let by an agent. There were threatening letters on the doormat from five debt/bailiff companies. The neighbour said what nice people the previous tenants were and that they had gone on to buy their own property. Thorough vetting of rental or purchase property customers is an absolute must.
Having said all this, I have still not commented on the issue of fees. I hate them and will do almost anything to avoid them. This includes spending more money on a purchase which does not have fees. The funny thing is that these more expensive products nearly always turn out to be cheaper in the long run. If a letting customer were to, instead of renting, purchase a leasehold property from a big property company they would quickly realise that the few pounds an agent scams off them would pale into insignificance when put alongside the pounds a property company can scam off them in the name of fees.
I suppose the root cause of fees is that the cost of employing someone in this country is ridiculously high. An agent just can not run a free public information service using their own paid staff. Whatever, fees must be just that, not a leaver for extortion. Agents see a markup on their purchases (credit checks) in just the same way that a grocer puts a markup on the cabbages he buys and sells. All retail businesses have to do this or they will go bust. Time is money and that includes admin time as well as customer facing time. This comes as a hard shock to consumers like Shelter, who are aware of the wholesale price and have little sympathy for the needs of a business company.
Re Contractors invoices - heard recently of a national agent who is proposing to deduct a fixed amount each month from their landlords rent to hold against possible repair costs in the future! Understandbly a lot of their landlords are unhappy about this proposal.
@Industry Observer I think we both know which RICS Regulated Asset Management Company has this practice
@TOOTIIO
As you are almost being civil to me - in fact heaven forbid, you are - I shall refrain from calling you Tootsie ever again!!
I am not dead against agents making certain charges to tenants, though I do think the bulk should be charged to landlords and only paid by tenants when it is quite appropriate that it should be them charging for it.
Accepted practice doesn't necessarily make things right - just ask any Scottish agent at the moment!!
A modest fee to an applicat I would say is no more than £100 per single named applicant - it is after all only one visit and one lot of petrol to show a property to a married couple.
I would have said £75 but can hear the howls of anguish now!!
Certainly no more than £75 for the Guarantor whose paperwork I am very familiar with.
On contractors I am aware of one massive asset management company that actually tells all contractors quoting for work to add 10% to their quotes!!
@John S
We too are charged a similar fee by an independent professional reference Agency. However, I think you may have missed my point, I was pointing out we only charge the Tenant a reasonable £20 + Vat if a Guarantor is required to cover the extra admin.
I totally agree that tenants should not be charged ludicrous sums for admin and referencing but it is fair to charge them a reasonable amount.
@I/O
I know you are dead against Agents charging Tenants but it is not illegal in E & W and this is the accepted practice (even the agent in the blog this article refers to acknowledges that they charge fees to tenants).
Therfore, out of interest, if you did accept Tenants were charged a fee, what would you class as a reasonable fee for the admin and referencing asociated with their application?
TOOTIIO - We get charged £15.50 + VAT for Tenant & Guarantor full profile reference by an independant company. With regards to charging hidden commissions it is so rife CARL and CFP write the procedures into their software which hides payments from Landlord. I could name one very large Company who not only operates in this manner but also adds 10% to their contractors invoice. Landlord thinks he is paying only this figure not the actual of cost of 20%. They are RICS Regulated and totally against their rules which makes it even worse.
Well said Industry Observer, spot on! We need to re-boot and stop looking at tenants with pound signs. It's the landlord who demand these services and they should pay for them.
Ray makes a good point but one that can be dealt with by experienced agents whom, when registering applicants can filter out the less than honest. Plus, having them sign T&C's beforehand which state, if they mislead or omit information they will be liable for actual costs.
Tenants should not be part our P&L's and we should be embarrassed they're subject to fees simply because 'Agents need to earn a living'.
I/O....
You comment "How mnany agents charge for the guarantor referencing when there is no charge to them, for example?"
Well we charge extra for a Guarantor but only a small fee (£20 +VAT) to cover the extra admin it takes to submit the reference, chase the reference, draw up the deed of guarantee, send it to the Guarantor, chase the Guarantor and so on..this can be quite a time consuming process and this cost needs to be covered. I would actually suggest we make a loss on charging only £20 for a Guarantor..
However, I actually do find myself agreeing with you on your other point about marking up contractor invoices. Landlords already pay us to manage their property including sorting out any maintenance issues, so why should they have to pay extra. This is an illegal practice (unless of course the landlord is made aware in advance) but unfortunately it is rife within the industry.
Letting Agent Today says Agent wants free publicity
Having been in the real world I have a comment on the subject of tenant fees, specifically the reference costs.
There are a minority, but significant, number of prospective tenants who are not truthful regarding their circumstances and make offers in the hope that they will slip through the referencing net. If they have to pay nothing for reference checks they can make requests to rent on more than one property, or even the same property, through different agents? Who pays when they fail? One of the reasons this is not too widespread at the moment could be that it costs them for the referencing.
We charged the cost of the reference plus ten percent for admin. Seems reasonable so what is so wrong with that?
Shelter should look at both sides.
@Shelter-Pelter
With respect the problem for most agents is that covering the cost of the application stage of the process isn't enough for them. Used to be, then they latched onto also wanting some net profit for the activity involved - including covering the costs of viewings where the viewers do not proceed with which I sympathise.
The problem then develops that as it has been a supply and demand captive audience for several years now with so many tenants chasing so few properties, agents started to charge more and more. The costs stayed the same, but after allowing for other cost increases - business rates and portal charges etc - the profit line actually increased and agents want to keep it there.
If agents charged only the cost of the services involved and a small, sensible, justifiable mark up, then I doubt Shelter would have a case and even they might aim at a different target. I have asked before and I ask again how can any agent justify £200 per applicant on a joint, married application with a referencing agent where the Guarantor if there is one is done free?
How mnany agents charge for the guarantor referencing when there is no charge to them, for example?
But agents put themselves up as an easy Aunt Sally here by charging such ridiculous fees when, as someone else has rightly pointed out, with technology the actual costs of most of an application other than the physical viewing (better qualifying viewers would help) and the fee to the referencing agency itself are in real terms, falling.
I say it again start switching the balance of these charges gradually from tenant to Landlord. Course if you are already also ripping off Landlords with excessive fees in terms of amount and frequency then you have a double whammy on your hands.
Like an agent I recently dealt with who charged a Landlord £3600 for the tenant find stage of a let and collect job and then charged 5% of £1000 a month for rent collection . They also set up a 3 year tenancy just so they could maximise their own fees - the Landlord had no idea it was a 3 year agreement and had never asked for one.
Many posters refer to the excessive fee chargers being in the minority - wake up and smell the coffee and just look at the average fees charged. In this case the agent was also a regional multi branch member of every body worth belonging to, not some fly by night rip off merchant.
No he was a mainstream rip off merchant!!
Agents wake up, pack in the indignation and effrontery and these silly references to mortgage fees (though I agree) and other comparisons and start putting your own house in order before sadly someone else does it for you, and probably with a heavy hand.
There are four problems you need to address: -
1. who is charged
2. what for
3. how often (a la Foxtons variations)
4. how much
Unless as an industry we address these someone else sooner or later will do it for us.
Somewhere along the line Landlords forgot they are the client and own the property. It is there responsibility, like any investment, to ensure their assest is protected not the Tenants. Why do they feel someone else should always pick up the bill...we now see adverts offering "free services".....all at the tenants expense.
This all came about by the greed of Landlords want "free or cheap Agent services" which forced them to lower management fees and charge the Tenants.
We get daily sob stories about how they are being squeeezed....I am sorry we all are. We have record low interest rates, exceptional rental growth and the lowest house prices for decades has the tenant received any benefit?
I agree with Shelter about time Landlords took on their responsibilities.
The problem with charging Tenants (or Landlords for that matter) what Shelter feel is a fair rate, is that this doesn't cover overheads of advertising, vehicles, office (or home office) costs, time-waster viewers (and Landlords). Yes, Landlords should pay these overhead costs but there isn't enough in 1 month's rent to cover it all and with most Landlords wanting to pay less and less lately, where does the income come from? Rent will have to go up accordingly, then nobody will be able to afford to buy or rent!! If Shelter want fair fees, then can an agent also charge a fair price to a tenant who doesn't show up, or charge them per property that they view, fuel for ferrying them from property to property, the gas & electricity they use when they walk in or phone our office cos we're sitting in the cold & dark unable to pay our bills until they do so?!!
Fees should be reasonable, and transparent at the outset. But, any changes to the law should NOT be retrospective. That would be extremely unfair and unjust. Especially after so many years of fee charging to tenants being the norm!
Totally agree with the comment about mortgage fees. What a MASSIVE rip-off !!!!!
Also agree with Industry Observer (both posts). Speaking for ourselves, we don't like charging tenant referencing fees (no qualms with charging contract and check out fees however) but that's the way the market works and accordingy it would be difficult to convince landlords they should pay. Bottom line is, agents provide many services and are subject to more and more legislation. It all costs money and we therefore need to make more money, not less. Like all industries, if governement takes away a revenue stream, then we (and no doubt landlords as well) will find a way to make it up. The same amounts of money will move around, just along different paths.
So, Government, stop rip-off fee charging (not just for mortgages but for lettings as well) and ensure that fees are transparent from the outset. But do not potentially shut businesses down by allowing retrospective refunding of fees that were (a) reasonable, and (b) agreed by the tenant upfront.
@Michael Edwards
As oposted elsewhere yesterday ANY charge to a tenant in Scotland is illegal no matter who raises it if that charge is made in connection with the preparartion of a lease - which clearly the referencing is no matter who does what. So this latest wheeze (I'll be polite and not say "scam") will only work until TSDO gets wind of it.
The contractors and suppliers one is as old as the hills and arguably provided the LL contract makes provision for the agent to make a 10% handling charge for maintenance etc work supervision in theory it should be OK as the LL is only paying what he would have been anyway, just not direct to the agent.
However I took legal advice on this practice about 15 years ago and was told at best it was dubious and at worst probably illegal. There is also VAT avoidance to consider - what if the contractor is not VAT registered but the agent is. Had the fee been collected direct it would have been a vattable service.
A practice best avoided
@Richard
Rents can only rise subject to supply and demand. Easy times at the moment but imagine the scenario in different market conditions. Would the Landlord be able to cover such costs through increased rent? Or might the agent have to reduce such fees?
Remember we make money long term out of the Landlord and shortt term out of the tenant (or used to from the latter until recently!!!)
All that will happen is that agents will charge more to the landlord, the landlord will then want more rent meaning that rents will rise and in the long run tenants will actually be worse off.
Agents need to earn a living and the majority are not charging exorbitant fees for the amount of work they do on behalf of tenants and landlords.
Shelter seem to be alienating a lot of people who have raised money for them (namely agents!) as I fill one will no longer be contributing to their coffers!
Responsible LAs act responsibly and charge reasonable fees and issue clear T&Cs to applicants. It's the minority who get the majority a bad name. I heard this week that Agents in Scotland are getting around the legislation by insisting their applicants pay the Credit Referencing Company direct, but then the CRC rebate a % back to the the LA!
There is also a practice in the business to take a commission from contractors and suppliers, with the Landlord Client paying the contractors gross bill. Most Clients are unaware and are not told of this hidden income stream. Hardly responsible practice again getting the PRS Agents a bad name
Do you know it's only just struck me - anyone watched Secret State recently, or read A Very British Coup.
Yes Shelter Govt subsidised, and regulation etc now no part of any mainstream Party manifesto.
So behind the scenes, get Shelter to stir it all up, build up a head of steam and eventually cave into public demand and legislate against fees, regulate agents (and Landlords of course) etc etc.
Only just seen this hidden agenda and I'm not a conspiracy theorist on anything. Clever tactic though - as used for Deposit Regulation courtesy of a campaign by CAB and finally the scurrilous Unsafe Deposits report.
As Basil Fawlty would say - clever, very clever.
Because it is the Landlord who wants to check that the tenant does indeed earn what he says he earns.
Just as it is the landlord who wants to check the tenant has not wrecked their last property, or got CCJs a mile long etc.
If the Landlord is not prepared to accept papers the tenant is happy to give them (or their agent) such as pay slips and bank statements, then why should the tenant pay because the landlord wants further reassurance?
Will banks stop charging mortgage set up fees any time soon? Agents charge a drop in the ocean compared to the take the piss charges levied by banks and local governments. Campaign against the many thousands charged by them rather than the few hundred charged by agents if you want to make a difference to people's wallet. Annoying to think that shelter gets core funding from government (ie. you and me)....
I believe that there should be some fees but that they should be reasonable and reflect the work involved. The fees would have to be statutory to ensure a level playing field for all Agents.
Why, for instance, should a Landlord pay for the tenant to be referenced?
Also perhaps Shelter should look at the fees being charged for mortgages as they appear to be based on the 'think of a number' method!