A report out this morning from consumer watchdog Which? claims that major letting agents are breaking the law.
Today’s Which? investigation adds fresh fuel to the controversy over letting agents’ fees. It claims that the agents are not being upfront about the fees they charge – and that is unlawful.
It names Foxtons, Barnard Marcus, Martin & Co and Your Move.
Last month, Which? sent mystery shoppers posing as potential tenants to four different London branches of each agent.
It claims that the fees were not disclosed sufficiently early, so tenants “face unexpected charges, are unable to properly compare prices and don’t always know what they are signing up to until it is too late”.
The investigation found that none of the agents provided information about fees in any property listings, on their websites or on Rightmove, or after tenants had registered online.
Only one tenant (at a Foxtons’ branch) was proactively given fee information when they registered in-branch or called to arrange a viewing.
No tenant was provided with a written schedule of charges, and in some cases tenants were either not given fee information even when they asked, or they were not given the complete details.
Which? said it believes that by failing to disclose fees upfront or during their first contact with a customer, letting agents are breaching consumer law by not providing material information in a manner that is clear and timely.
Which? has now written to all four of the agents to demand improvements and remind them of their legal responsibilities under the Consumer Protection from Unfair Trading Regulations (CPRs).
Richard Lloyd, executive director at Which?, said: “It is vital that letting agents are upfront about expensive fees in advance. People should know all the costs before they invest time and effort in viewings. Drip-feeding fees is unfair and a major barrier to people comparing agents and properties.
“Despite its dramatic growth, there is also an alarming lack of consumer protection and redress in the rental sector. Tenants deserve much better.”
Which? is now calling for an “end to hidden fees”, for increased consumer protection and for letting agents to be covered by the same law as estate agents.
An amendment to the Enterprise and Regulatory Reform Bill, which is expected to be debated in the House of Lords tomorrow, would require all lettings agents to sign up to a redress scheme, as well as giving the Office of Fair Trading the power to ban letting agents that break the rules.
Martin & Co has so far been the only agent to react publicly to Which?’s claims.
In a statement yesterday evening, it said: “Martin & Co are all for operating a transparent business model to both landlords and tenants; however, current industry practice is not to publish fees.
“All applicants wishing to take a property via a Martin & Co office are provided with terms of business which clearly provide information on any fees that they may be liable for, and of course they can be requested before a viewing is conducted.”
It said that one simple way of making it industry practice to publish fees was for portals such as Rightmove to insist on it.
Ian Wilson, managing director, said: “If all properties advertised on the big property web portals such as Rightmove and Zoopla had to display the fees and charges attached to applying for a tenancy, then all agents would be competing on an equal footing. Currently the practice is not to publish fees when advertising properties to rent and the first agent who bucks this trend risks being selected against by consumers who may assume (wrongly) that the other agents do not charge.
“Currently, transparency may work against an agent in this age of voluntary membership to better practices in the industry.
“A letting agent is a commercial business and as is the case of any other business in any other field, businesses are run to make a profit – i.e. charges being made to an applicant in return for the services which are provided.
“We should also remember that publishing fees could have a positive or a negative impact on the consumer – some may raise their prices to bring them in line with others, but adversely the fees could be driven down which may result in a lower level of service by some agents.
“Martin & Co do not take money from tenancy applicants before the applicant is made aware of the fees and charges that they will incur. If Martin & Co staff believe that an applicant will not pass a credit reference and be approved for a tenancy then we will warn them of this possibility to avoid wasting their time and money.”
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Comments
@TOOTIIO
As peace rather alarmingly seems to be breaking out between us (!!) and I don't want to spoil it let me just clarify with a bit more detail on what the OFT expects based on my experiernce of the 2 year argument we had with them. And an argument with the ASA too that I have only just remembered - seems I fall out with everyone!!
Quite simply all fees have to be transparent which means clear, simply explained and above all known right at the outset of any potential relationship.
The OFT definition of this is that anything and everything you want to charge (prior known 'standard' compulsory fee) or may charge (unknown at start but later event say a bounced cheque or arrears letter charge [OFT hates those too they should tell the banks!]) AT ANY STAGE of the tenancy and its application process must be made available in the form of a written tariff.
Now you, me and the rest of our industry (and sales) will agree that this would be part of the application process, so as with an EPC you don't need to issue them to anyone who may show the slightest interest in the property, or even want to view it, only show it and then give hard copy (or electronic if accepted) to the eventual tenant.
But the OFT goes further back than that hence the ASA recent pronouncement that they will for certain back up and enforce if necessary.
They do this by saying the fees that MAY be patyable as well as those that WILL be payable MUST be made available to the prospect as soon as any interest is shown in the property. Hence the ASA position on fees and adverts and my guess is ASA will have consulted OFT to be certain of their support on this stance.
The reasons for this are many fold, ranging from a tenant may let another property go, come to you for yours only to find extortionate or hidden fees.
Or you could well have two agents (especially on sales) on the same property but with different fees. I agree with the post below that buyers and tenants will vote with their feet and go to the one showing the lowest fees and that is a key issue.
I don't necessarily agree with any of this, but my own practice on viewings going back 20 years always to take copies of application forms and the tariff of fees (attached to it) and guarantor forms so if a viewer showed real interest they were issued with them there and then to take away and thus save playing catch up if they rang in a day later saying they wanted it.
I dealt in volume and reckon it was always worth the extra trees and ink but others understandably may not agree. I would also carry blank tenancy agreements and dish out one (or two if a guarantor) of those so again as required under other Regs they'd got those at the erarliest stage as well. These with PI etc etc are now 20+ pages long!!
I'm not suggesting for one minute the entire industry starts doing this, but it is where this latest ASA business is leading and in fact beyond in terms of publishing the tariff in the public domain. This is the thick end of the wedge as opposed to just handing it out or even having it on display in the office or, heaven forbid, in the shop window.
Interesting issue this and interesting to see where it ends up which if ARLA et al don't act in unison and very quickly will be with public display, and in newspaper and all advertisng media and above all in portals as well.
RM may not like it but they will have to develop software to do this (as with EPCs) and of course will then state increased costs and so raise fees - again.
I agree with what you say in your post @ 2013-03-09 14:14:32 completley.
This is the standard practice with Martin & Co. All Tenants and Applicants are made aware of fees prior to either applying for a property and commiting to the Tenancy.
They are just not necessarily published on their website or given out to randoms who wonder off the street who just willy nilly ask for a list of fees and with no interest in a particular property (these are usually other agents).
Sorry TOOTIIO meant to add that it would have been the same comment from me no matter which agent had made it. The whole point is it is what the OFT says that matters as they can enforce their opinion with injubnctions, as Foxtons discovered to their cost.
ASA can only impose fines, though I assume every day an offence persists as with EPCs etc.
Did you see this post in the other item same day? Note the link to the OFT hence why I made my original comment. Here the complainant went to the ASA - guess who the next one might go to, or the ASA if agents don't pay attention to what they want?
Added by ASNA on 2013-03-06 09:22:59
Does the ASA actually have any authority here? I don't think so unless the OFT back it up.
@TOOTIIO
Apols been away this past week so didn't see your typical response to mine and sadly you will probably never see this one.
Tootiio I speak from experience (bitter) and knowledge here having fought the OFT on a feew argument over a 2 year period about 10 years ago. Their stance then was that anything not made known to the tenant BEFORE they entered into the tenancy could not subsequently be charged to them.
Ditto any fees payable before commencement if they were not known AND signed for.
It has been industry best practice for about 12+ years now, probably longer, that all fees must be made known to a tenant in a published tariff of fees.
I care not what WHICH says, or this latest ASA pronouncement, or what you do or do not have to do to satisfy regulatory bodies.
All I'm doing is quoting the position as far as the OFT is concerned. Do whatever you feel like just depends on whether you care about being compliant with what they want.
M&Co I have no axe to grind - you are funny!!!
Here we go again...Industry observer spouting more rubbish about Martin & Co yet again.
Still bitter you either got sacked or didn't get the job in the first place with Martin & Co.
The TPOS, ARLA, NALS etc don't require agents to display their fees on adverts, as long as Tenants are made aware of the fees before applying the agents have done nothing wrong!
In the case of Martin & Co all their fees are transparent and clearly listed on their Terms of Business which are signed when an applicant applies.
I won't be disclosing my fees online until everyone else does. I disclose them at the viewing, and when requested beforehand. What a load of nonsense.
"In a statement yesterday evening, it said: “Martin & Co are all for operating a transparent business model to both landlords and tenants; however, current industry practice is not to publish fees."
What - so this is not what the OFT require apart from best practice then?
Oh dear oh dear oh dear - someone tell Ian Wilson ..."When in a hole........"
Tip of the iceberg the whole industry is a mess even the cowboys who pay for window stickers are at it
Have you EVER tried cancelling a Which? subscription?? They tempt you with a free trial they you have had it
UTTER NONSENSE - These firms are regulated and members of an independent redress scheme. If the break the rules, you have redress.
Which? should look as those who are not - thats where the real issue lies and why the Government wont regulate. Too many people would lose lots of money
All these firms are ARLA members and are compliant. I would be more worried about the myriad of lettings agents who have dipped into clients money and are repaying from other landlords rents.
Here is another radical idea for the poor, hard done by tenants - ask.
Ask what the fees are & ask for written confirmation. There. Sorted.
Let's be accurate please. Which are a business NOT a watchdog. Shall we have all mortgage providers display THEIR charges alongside their adverts? Do solicitors display their charges on yellow pages? Most agents make prospective tenants aware of charges before they sign on the dotted line. They always have the option of saying NO and walking away.
Ok I haven't really put the sign in the window. But I will continue to ensure that EVERY single applicant is advised of our fees before or at the time of submitting an offer and certainly before handing over any money.
How else do WHICH propose it be done as common sense take precedence?
I would refer Which? to the reply given in Arkell Vs Pressdram (1971)
I've just put a REALLY big sign in my shop window that reads;
"OUR ADMINISTRATION FEES ARE £100+VAT PER PERSON" & "CHECK OUT FEES OF £100".
Of course all our tenants make their decisions based on these amounts!
so long as tenants are told about the fees before the sign a tenancy agreement, then surely that's OK? And it annoys me when these consumer mags/groups start to inflame the situation by using emotive and exaggerated adjectives such as "expensive" as in "expensive fees". I'm all for transparency, but consumer protection is going mad. Why do we have to start from the presumption that all consumers are stupid? To be honest, it is probably the consumer who knows too much about consumer protection - ie, has a brain - who is likely to "kick off" in the first place and claim "stupidity" as their defence in court. And as for publishing fees? What a silly idea.
"A matter of opinion" - I remember when agents in Scotland were talking about the gobsh*tes at Shelter yacking on to gain publicity. Next thing we know Shelter are part of the Government steering commitee and all tenant fees are outlawed.
There is another agenda. Government want to follow the Scottish route and are stacking up their "evidence" to justify the action.
"Michael Saville" You really have a bee in your bonnet about M&Co. Its becoming boring.
I would refer Which to the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists.
Despite what Ian Wilson says we have always disclosed our fees on our website, property details (including to the portals), pre move in paperwork as well as tenancy agreement. It has not damaged our business at all. In fact out transparency has encouraged the other agents to take a similar line, apart from the corporate agent who is not allowed to display the fees unless asked.
This is not about undercutting the competition as I am not the cheapest nor am I the most expensive, it is simply about openness and honesty. Too often agents forget we have a duty of care to tenants as great as that as to our landlords, especially if we are going to be taking money off them.
So, Which has written to these firms "demanding" improvements!
By what right do they demand?
Let the mystery shopping begin…… the findings will be enlightening.
M & Co's Ian Wilson said... "All applicants wishing to take a property via a Martin & Co office are provided with terms of business which clearly provide information on any fees that they may be liable for"... Didn't Watchdog say that they hadn't disclosed fees sufficiently early ??!
The trouble with M & Co is, as per their franchise website under "Skills you need" they say "You do not need direct experience in lettings, estate agency or the wider property sector to succeed at Martin & Co. Franchise"
No wonder they aren't toeing the line......!!!
Portals could play a part in helping to speed up this transparency within the industry, however there would be an argument that they would be playing a part in helping to reduce income form the same customers that are paying their hefty fees.
Interestingly, Allagents appear to be working on some fee comparisons tool. I noticed last week that they have now introduced an 'agents fees' tab on agents profile pages.
Until this is tested in court None of the mentioned agents nor the entire industry who all work in the same way are breaking the law, this only some gobshite from Which yacking on about something again hoping their yacking will gain traction and sell more Which subscriptions.
If one takes up one of the "free" subscription or free trial offers from Which, I can't ever remember seeing the cost of the monthly subscription advertised anywhere. Pot Kettle Black?