There would be no private letting industry left in England if agents were banned from charging fees.
Jonathan Morgan, who heads up Morgans in Leeds, said: “If there are no fees, agents won’t be able to trade. To ban all lettings fees is crazy – it’s like saying a mortgage broker can’t charge a fee for finding a mortgage.”
He was speaking after Shelter succeeded in its campaign to ensure that all upfront fees charged to tenants are abolished in Scotland, since when the charity has turned its fire on agents in England.
Morgan said a ban would be disastrous, but he called for all agents to provide transparent fee structures which prospective tenants were made fully aware of.
He said: “Any agent worth its salt would sign up to such a scheme where they provide tenants with a breakdown of charges before a tenant has to commit to anything.”
Shelter’s recent YouGov survey said 23% of tenants felt ripped off by letting agents, but Morgan believes that by introducing an agreement that clearly shows what fees are charged, any mistrust between agents and tenants would be eradicated.
Morgan said: “Of course it’s essential that fees are fair. With such a booming lettings market and some unscrupulous agents entering the market to take of advantage of this, tenants must feel safe and secure in the lettings process and landlords should also have a clear understanding of what their agent is charging their tenant.
“To talk of outlawing all charges is just not practical as there are significant cost implications for operating a business in the first place, not to mention carrying out viewings, processing applications and general administration that have to be met.”
Shelter has also called for a new five-year private rental contract to be introduced to give people renting greater stability.
Shelter believes that a new type of tenancy called the Stable Rental Contract should become the norm across the rental market in England to help tenants put down roots and give landlords greater certainty over returns.
It suggested that under the five-year contract, rents should increase in line with inflation each year, giving tenants and landlords predictable outgoings and incomes.
Morgan commented: “The premise of a five-year contract with the ability to give notice on either side is not sound. Currently the average tenancy length in our city and the north Leeds area is around 8-10 months and this is a reflection of the lifestyle of the vast majority of our client group.
“They rent for a shorter period because they actually want short-term commitment and flexibility and have no interest in being committed for a longer term. If it’s the case that renting is a stepping stone for most people, and evidence suggests that this is very much the case, then it follows that a five-year tenancy will only appeal to those who do not envisage buying in the next five years.”
Morgan said that the European model has long been held up as a reference point for what is happening in the UK housing market but he thinks it is highly unlikely that the UK will follow the same path.
He said: “In Germany, for example, the most pro-rental market in the EU, around 54% of people rent their home, but it is also true that the cost of buying a property has always been much higher, with average deposits at around 40%. In simple terms, the buying public have always had to have significant equity.
“This is not what the British public have become used to, and whilst it might take a while, the consensus is that loan to value requirements will fall back over time towards levels at which the volume of transactions will once more increase.”
He added: “We are bemused by the proposal to introduce a five-year tenancy, particularly when this would include break clauses on both sides, thereby providing the tenants with no security whatsoever.”
Morgan said that the Government should resist Shelter’s calls and not be panicked “into restructuring the private rented sector”.
*Consumer watchdog Which? has now joined in the clamour over letting agents’ fees which was started by Shelter.
It drew attention to the issue during a Radio 5 Live ‘summit’.
Which? says on its website that it is concerned that the lack of transparency in tenant fees, alongside a housing shortage, means that there is no incentive for letting agents to reduce their prices.
It adds: “It’s not right that consumers are having to pay fees to letting agents when it’s not clear what they’re getting in return.”
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Comments
We are a family of four , went to London to find to rent a property , what all agencies required us where 500 pounds to reference - credit check all of us !!? Why do they credit/reference check family members - 18 year old boys and housewifes with no income or credit reference history and dont follow what they do in rest of Europe to have a lead tenant in such situations ? More specifically they asked 500 pounds for these checks + 200 pounds for admin fees + 150 pounds for inventory fees + 100 pounds for check in fees. SHAME ON THEM THAT THEY ARE TRYING TO STEAL THE MONEY OF HARD WORKING FAMILIES AND SHAME ON THE UK PARLIAMENT THAT DOESNT PROTECT THOSE FAMILIES !
"Landlords will blame Shelter and the Government"
If only that were true we wouldn't have a problem.
Sadly some of my landlords can't even grasp the concept that VAT isn't a charge levied by me, it is a tax levied by the Government which I am required by law to collect
A reasonable agent will charge reasonable tenant fees and passing these on to the landlord isn't the end of our business so we need to calm down.
If this becomes law then landlords will still deal with us but blame Shelter and the government so the transition should be relatively painless. We don't lose any revenue but simply re-assign it so the only issue is the unreasonable fees that the unreasonable agents will try to pass on, time to get your house in order...
Surely banning all fees to tenants could result in business overheads being far greater and therefore businesses may not have the funds to pay for quality staff or even enough staff as the overall profits are going to be a lot less?! A fee cap is surely the answer if any.
Food for thought for my English colleagues....in Scotland the Landlord pays for all newspaper advertising.....how many adverts have I inserted in the local other other papers over the last 12 years?...... absolutely zero.
How much would this save you each year??
We have been internet based for years at a fraction of the cost and have no issues with finding tenants.
All sections of your industry in England need a shake up to get everybody on a level playing field
@Scott
I pay £3.90 for a pint of decent real ale now and I live 50 miles from London admittedly along the south coast.
The sad thing is £400 application fees are not restricted to London.
@Dave
Note the whole point about this debate in Scotland and in E&W isn't whether referencing/application call them what you will fees should or should not be charged.
The whole debate is about if they are charged.
It seems most agents cannot live without them, a position in my view they have gradually brought upon themselves over the past 20 years by being ever creative in what they charge for, how often and above all, how much.
But the point is the issue, as underpinned by the Law, is WHO should pay at least in the direct sense.
@Dave
You clearly have no idea what you are talking about so best you shut it.
Refrence fees are essential so that a third party can check out the prospect to avoid the growing number of unemployed taking rented property because nobody can ID them. This leads to non payment of rent and sadly no insurance cover at a reasonable fee for landlords.
One guess as to what then happens? You have it - up goes the cost of insurance and up goes the rent to cover and then some on top as @Dave
You clearly have no idea what you are talking about so best you shut it.
Reference fees are essential so that a third party can check out the prospect to avoid the growing number of unemployed taking rented property because nobody can ID them. This leads to non payment of rent and sadly no insurance cover at a reasonable fee for landlords.
One guess as to what then happens? You have it - up goes the cost of insurance and up goes the rent to cover and then some on top as a commission to the landlord/agent. Result = tenant pays for enhanced insurance which will inevitably be greater than the reference fee.
a commission to the landlord/agent. Result = tenant pays for enhanced insurance which will inevitably be greater than the refrence fee.
Industry Observer - London prices cannot be quoted as either typical or as a benchmark.
On a recent visit to London I visited The Lowlander pub and was charged £4.20 for a half pint of lager and £82.00 for 4 x snacks.
I charge tenants a referencing fee of £60.00 + VAT per adult applicant. I only charge if the application is successful. I do not charge if the application is unsuccessful and I do not charge any other tenant fees.
Shelter have demed these fees illegal. It is not right and it is not just.
Hi Steve from Leicester
I'm well aware of the difference and it is vast.
One is a reasonable profit, with time and effort being suitable recompensed. Such as would be allowed before refunding part of an application fee to prospective tenants.
That is cost plus a modest mark up
By "business profit stream" I mean excessive reliance on such fees because of excessive profit. You know the sort of thing - charging a couple of tenants £400 application fee, that sort of thing. Not you I know, but certainly some agents and from previous posts which may or may not be true, a M&Co office in London I seem to recall.
@Breaking Bad
Yet more extremist b*******s why can't those in favour of fees put forward rational arguments other than an industry in tatters and thousands on the dole queue?
I appreciate such arguments are difficult to put forward and justify what in many cases is an unjustifiable fee structure, but do at least try
Pragmatically, what this will do is put good people on the dole queue. The charges pay for the recruitment of a person or persons to progress the let through to completion. Economies of scale would suggest 1000's out of work.
@ACE
Its the going rate down here in London for a 'good' administrator knowledgeable of the industry
With regards to charges to tenants, our charges to applicants are for finding them a property and nothing else. The landlord pays for referencing and the AST. If an independent inventory clerk is used, as we recommend, then the cost is split equally between the landlord and the tenant with the landlord paying on the way in and the tenant paying on the way out.
We do make tenants aware that if they want additoional copies of the AST/Inventory because they have lost their original then there will be a charge and why not? Solicitors charge for every call, letter, email so why shouldn't letting agents?
As for the 5 year tenancy, in January one of our tenants will celebrate the strat of their sixth year in the property. No renewal fees, no rent increase either. Why the fixation with 5 years when there is no call for it from the vast majority of professional and rersponsible tenants?
a tenant - Thank you for that well balanced piece of commentry.
Some agents would accuse all tenants of adopting a victim mentality. Some agents would state that Shelter encourage said victim mentality.
Oh and if your landlord wished to deal with you direct then they would not have employed the services of an agent. Would they?
Shock horror, agents ripping off tenants!!! Wow, we never knew that. You lot have been double-dipping for years. Your client is the landlord, not the tenant. For hmm, your landlands pay ffs - that is who you are working on behalf of after all! None of you are providing a service to the tenant no matter how you dress it up, your responsibility is to your client and that is the landlord. I currently rent and the agent wants £150 plus VAT for another years just to renew the tenancy agreement. All she has to do is change the dates and press print. I have offered to do it for her, guess what, she isn't interested! I am actually thinking of bypassing the agent and going straight to the landlord....... oh the can of worms that could open!
Sorry FUNKY MONKEY you are "making the shoe fit" to suit your point of view.
In my example - Audi would be the owner /landlord - the leasing company would be the agent - and the customer would be the tenant.
When leasing a car, the customer has to pay for the credit check (reference) and you would not expect it any other way, so what is different when leasing a property????
We are a local agent who offer a set one off fee to tenants, no renewal fees etc. We can argue over what is a "fee" or a "charge" but the bottom line is that tenants do receive a service, viewing, referencing, lease giving them more security than the landlord, inventory & deposit (which is there to protect tenants more than the landlord as most disuptes end in tenants favour) check in, check out, changing over utilities, reporting problems back to the landlord. Blah, blah, blah.....but they don't get a service????
All irrelevant really, order of events: tenant fees banned, landlord fees go up, rents go up as landlords look to recover extra fees, tenants are not paying so don't get require kind of service they expect but they are paying more in the long term as each and every month the rent has increased.
The other red herring in all this is the stable rent of 5 years - who wants more stability? Landlord or Tenant? In a time where rent arrears is increasing with tenants losing jobs do they really want to sign for longer than 6-12 months?
We find Landlords are happy with long term tenants as long as they are comfortable they can get them out if they cannot afford to pay any longer. The 5 year lease with options for the tenant to break but not the landlord is as one sided as tenants only having to give 1 months notice to vacate a property and landlords having to give 2!
Scottahinabeer – Is your story here so weak that you have to change industries????
I think you need to try much harder to show me why sales and lettings practices are really different in required ‘admin’ and as such require fees to applicants for one and not the other.
And besides – in your example Audi is both the ‘owner’ and the Lease Company so things are hugely different.
FUNNY MONEY - This is different to the sales market. This is the leasing market. In every other aspect of leasing, the customer pays fees for referencing. This practice has been outlawed for property in Scotland and that is clear discrimination.
If you were leasing a car, you would not expect Audi to pay your referencing fee. Why would you expect a landlord to pay if you were leasing a property????
Frankly I find it amazing that you agents can get away with charging tenants fees for contracts etc. - You receive a fee from the landlord for providing these services for the benefit of the landlord, after all you are acting for the landlord and as such he should pay.
I fail to see how this can be different to the sales market – the owner pays the fee and the buyer does not. And please do not say there is much more involved with dealing with potential tenants than buyers because the act of promotion, viewings etc are the same…drawing up a rental contract or creating sales pro forma documents are similar… the only difference is credit check and inventories – and as these are both for the benefit of the landlord should form an element of their percentage fee – and please do not quote ‘staff time’ as this admin time, is again no different than your sales negotiator chasing the solicitors and other agents in the chain of a sale – again this is part of the sales fee to your client.
The only difference ultimately is you make more money in a one of from a sale – however you get good repeatable income from a landlord that over a small time equal a sales income.
Stop being greedy!
IO - I'm not being pedantic here, and I appreciate that I'm only picking up on the tail end of your comment, but what exactly is the difference between a "business profit stream" and a "cost plus modest mark-up"?
"Cost plus a modest mark up" is "profit". Should a business be able to make a profit from tenants fees or not?
Blimey where to start. Let’s begin with the Law, always a good place even if you don’t agree with it.
Dave, Yarrum95 and Lawrence Meade seem to me to be talking most sense and nearest the mark here. Letting agents going out of business with no tenant fees (or charges or whatever). Having a joke aren’t you all?
The legal starting point is that in Scotland it has ALWAYS been illegal to charge a tenant any thing in connection with the creation or renewal of a lease. Period, that’s it. Someone referred to border creep from England and that is exactly what has happened. I’ve been supporting Scottish letting agents almost 20 years and for certain none of them, or very few indeed, ever charged anything to tenants.
The Landlord paid it all if there were any such fees or charges. What is so difficult about a level playing field – perhaps the problem is that Landlords will comment and question more as opposed to tenants desperate for a property and willing to pay ludicrous fees.
“There should be transparency” – indeed there should. Well done all agents displaying fees and tariffs and dishing them out but no extra Brownie points as that has been obligatory since UTCCR came in and the OFT started harassing Foxtons. And under various Codes of Practice of course.
“Essential that fees are fair” – now we are getting to it and why agents have brought this on themselves because most tenant charges are not fair they are a disgrace and close to usury and extortion.
What is wrong with 5 year contracts – hasn’t anyone ever heard of, or created, a protected shorthold tenancy agreement?
Let’s finish with the Law shall we?
Statute similar to the Scottish Law already exists in E&W and whilst I don’t want to make it rain on anyone’s parade Shelter and Which have an easy target here just as in Scotland. They simply need to press for application of the existing rules and regulations on what can or cannot be charged and who to.
Try Googling The Cost of Leases Act 1958 but not recommended if you are desperately attached to tenant fees or have a weak constitution. Or a business too reliant on tenant fees and charges as a business profit stream as opposed to covering costs with a very modest mark up.
Dave's got a fee structure that works for him. Fair enough.
If what he's said about WH Brown is true then I agree with him that that's unacceptable too (though I add the caveat that sometimes tenants and landlord claim to have been ripped off but you only hear half the story).
I'd argue though that Dave's structure is less fair and less transparent (even if it is commercially successful).
Our work involves two separate jobs - "Letting" and "Managing". Dave is subsidising the cost of "Letting" by charging more for "Managing".
Dave's charging structure means landlords with low tenant turnover subsidise those with a higher turnover. At least my fee structure more closely resembles the work we actually do.
Only 25 years Ray Comer ! I have 35 years experience. We only started charging Tenantrs about 10 years ago simply as WH Brown quoted 8% management and added it all on admin fees to Landlord, admin fees to Tenants, inventory fees, renewal of lease fees. Our USP is one flat management fee and we are still here doing nicely thank you with a decent sized portfolio. We do charge Tenants at the moment as well. We do however refund most of it if we turn the Tenant down unlike WHBrown. We recently had a case where the client was doing a mortgage thru them and was turned down as self employed for only a year. They suggested he rent instead until accounts built up, charged him £200 for referencing and then turned him down for only being self employed for a year and kept the fee. They dont like letting houses at the moment with so few available, they prefer to have some available to keep getting reused Tenants fees in.
Try a decent rate and if your Landlords find they get a decent return on their investment they will stick with you for many years.
DAVE - I think that we have to distinguish between admin fees and referencing fees.I don't think that admin fees are being contested in Scotland. I have never charged an admin fee.
I feel that an integral part of our business is the robust referencing facilities that are available.
I feel that if I were applying to lease a property then I should have to pay referencing fees as I would if I were applying to lease a car.
Sorry, comment below was from me inr esponse to Stonehengd
I provide tenants with a one-stop shop where they can consider a selection of properties, and I employ proactive staff who will listen to them, try to understand their needs and suggest properties which might be ideal but not immediately obvious.
My staff will take them out to see properties at a time convenient for them (within reasonable parameters). We'll make sure the landlord knows and has complied with all of his legal obligations (gas safety, EPC etc) so they can be sure th property they rent is safe and legal.
We'll give them the peace of mind that any money they hand over for rent or deposit will be held in a client account until it is correctly distributed to its rightful owner (be that tenant or landlord).
Although we are ultimately bound by our landlord's instructions we'll do whatever we can to ensure their property is proeprly maintained, and in cases where it may be dangerous we'll act as Agent of Necessity and deal with it even if it means a fight with the landlord.
That sounds rather like "providing a service" to me.
May be the property owners need to set up a group which is the antithesis of shelter? The success of shelter relies on dopey, idealistic politicians who live in comfortable armchairs and who were probably voted in by shelter members. These are the people that agencies need to convince, not tenants.
With quite a few years experience of letting agents, both as a tenant back when I was young and now as a property owner I know there is a lot to complain about. My first attempt at using an agent was an education in itself. They were constantly using me as a cash cow to cover up the bungles that they were making. They were ARLA approved of course. The agents that I use now are very good and both tenants and myself get what we need. These people are ARLA approved of course and charge lower fees than the previous agent.
My first agent proved to me how very important referencing is. They were not very good at it and cost me a lot of cash and left the tenants as debtors to utility companies and the council because they were living above their means.
We must also remember that when tenants were able to virtually take over their property back in the 60 to 80s (?) property to let completely vanished. It was only when shorthold tenancies and section 21 orders were established that letting became an option again. This might be a generalisation but, in my case, I would only want to remove a tenant if they were not paying and/or wrecking the place. Changing tenants is an expensive game in both fees and lost income and is to be avoided. Even keeping tenants at below market rents is preferable within reason. Keeping up with maintenance and doing it to a good standard is also better than loosing a tenant.
PEDANT'S CORNER
Let's get something straight here as this is a common error. The artice jumps from "fees" to "charges" all the time.
You charge a FEE to a client for whom you are providing a service, i.e. the Landlord.
You make CHARGES to applicants as you are not providing them with any service and you have no contractual relationship with them, and all you are doing is ensuring they are 'fit for purpose'.
You DO NOT charge 'fees' to applicants.
I've been in this industry for almost 25 years - admin fees HAVE always been charged by the majority of agents to make the maths work when operating a letting agency.
Commission rates were also much higher then; as they have been squeezed by competition so the agent relys more on their fee structure.
Simplistic views like daves just don't work in the real world; if we dropped fees and upped commission rates we would be out of business in 12 months, with the loss of a lot of jobs by the way, as landlords leave to go to the cut price agents with their cut price service; the industry would eventually go into decline.
I agree with Dave....I have been trading for 12 years in Scotland and never charged fees....it was the drift of English practice coming across the border which caused the present hiatus.
Hopefully I will no longer here Landlords griping that "fred" down the road only charges 6% full management fees......because "fred" will not be trading much longer now as he cannot rip off his tenants. The Industry will not die...it will adjust and English and Welsh Landlords will need to accept, as they already do in Scotland, the true cost of a full management service.
I am staggered that a charity should try and dictate in this way. I can only speak for myself and my company but we give every tenant a breakdown of costs as a matter of course and I expect most reputable agents do. Everything is clearly shown before they put pen to paper, nothing hidden in small print, but surly this is just common sense and good business practise. I have to assume that a few bad apples have come to light and so all the calls to crack down on everyone starts. What is the point of ARLA, NALS, SAFE AGENT RICS, OMBUDSMAN etc, etc when yet again the majority of decent agents are penalised for doing it right and following the rules. Shelter should crawl back in to the dark as they have no clear idea what the fees are for, the landlords employ us to manage their property, if a tenant wishes to rent said property they have to be referenced other wise the landlord could pursue the agent for not carrying out their proper duties in making sure the right tenant moves in. It costs the agent to advertise, carry out viewings draw up agreements not mention paper and man-hours this all takes. The letting agents charging a fee is not ripping off the tenant but simply covering their overheads, if the applicant feels the fee is too high they have the freedom to choose another agent and property. I would welcome SHELTER to come to my office and work with me for a week and see how we deal with applicants and the work involved.
Nice to see someone who runs a letting agency writing a proper, well-considered article about an issue which could threaten us all, instead of the usual "advert for my company dressed up to look like an editorial".
As well as setting our fees out in our "official" paperwork we have a simple Word document we call "The Basics" which we hand out to anybody who expresses an interest in a property. It says things such as:
"Application Fee £xxx - We charge this fee when you apply for a specific property. It helps to cover the cost of the time our staff spend dealing with enquiries, showing people round properties, and the cost of processing your application."
Other fees are listed in the same plain English, right down to
"Rent £xxx per calendar month - This is the rent for your property. It is due in advance (so you pay your first month’s rent as you move in, the second rent payment one month later and so on)."
It adds at the bottom "We also charge our landlords fees. Landlords have to pay us for. . . . . . etc"
Why would any agent not want to do that? It costs pennies to produce and no-one could ever accuse us of lacking transparency.
There are no need for fees. There never used to be admin fees. Agents brought them in so they could quote a lower management fee. Simple. If no admin fee charge an extra percentage. Stop talking rubbish.
Referencing clerks from all areas of Scotland are being posted redundancy notices as we speak. While some form of referencing must exist in Scotland, it will not take it's present form and to employ a referencing clerk will not be possible.
Stable Rental Contracts of circa 5 years would effectively outlaw renewal fees also.
If I apply to lease a business car, computer equipment, printer /photocopier in Scotland, I would be liable for fees but if I apply to lease a property in Scotland I am not. It is clear discrimination.
The Scottish Government do not understand the purpose of referencing and when questioned knew very little about ID fraud and the need to protect against it.
The Scottish Government claim to support small businesses, the Scottish Government do not understand small business.
I don't think the point of this forum is for you to comment on what level of pay someone receives.
It is down to Hmm to decide the levels of pay within hs business.
These idiots should be sitting on that which tey are talking out of. Get one of these dimwits to work in an ageny office before they allow them to spout off and they will no doubt change their small minds. After all there are many proffessions where there is no room to practice prior to obtaining training. These brainless fools know nothing and should just shut it.
We live in a 'democracy' (I think not). I chair management meetings and get the group to agree a majority vote wins otherwise one lone voice stops proper democracy and the majority lose out.
hmm...
You clearly have more money than the majority of my tenants if you feel this amount of pay is justified
First off ignore any statistic pumped out by Shelter; it is very clear that no-one there has GCSE Maths. Creative writing yes but anything to do with numbers? Forget it, they punch the calculator with boxing gloves and regurgitate the figure that shows up on the screen with an ignorant acceptance that would be funny if it weren't so serious.
All Shelter and Which will achieve is a very simple polarisation of the market. Agents will quickly learn to charge all the fees to the landlord who in turn will stick up the rent. Demand push inflation will sort out those that can pay and those that can't. Very simple very transparent
We employ an administrator on £22k pa to carry out reference checks, organise contracts, set up standing orders etc etc
If admin fees were scrapped, how would we be able to employ this person in the first place??!!