Letting agents’ fees, criminal landlords and longer tenancies all took centre stage in a House of Commons debate yesterday.
Labour MPs led by shadow housing minister Jack Dromey called for a clampdown on ‘rip off’ and obscure letting agents’ fees, while calling for tenants to be given secure, longer-term tenancies. Labour lost their vote, but Tory minister Don Foster speaking for the Government conceded that they would be "listening carefully" when the OFT and CLG report on their respective inquiries later this year.
In yesterday's debate, Labour MPs pointed to the example of the London borough of Newham in pioneering a borough-wide register of landlords – which Dromey described as giving an “admirable lead”.
During the lengthy debate, the Labour MP for Leicester West, Liz Kendall, said she had done a mystery shopping exercise on letting agent fees. She said these were unfair, and one agent was charging a fee for what, she said, she didn’t know.
Another MP, Rosie Cooper, using parliamentary privilege, named a lettings agency in Lancashire for its ‘appalling’ practice of charging tenants £200 for a credit check, which tenants then failed.
She said both agents and landlords needed to be regulated.
The opposition debate centred on a motion tabled by Labour, which noted “with concern the lack of protection afforded to tenants and landlords by the unregulated lettings market”.
Labour said that the rented sector creates a “lack of stability, security and affordability for families and other renters”, and the motion also called on the Government to empower local authorities to deal with rogue landlords.
However, housing minister Mark Prisk made plain the Government’s opposition to red tape in the private rented sector.
His amendment to the motion said that the Government “supports action to be taken against the small minority of rogue landlords, without burdening the whole sector with unnecessary costs”.
The amendment also said that while it backed measures against criminal landlords, “excessive red tape would force up rents, reduce choice for tenants and undermine future investment”.
Prisk, a former chartered surveyor, was, however, reminded of his own attempt to introduce regulation of letting agents by Dromey, who said that the RICS had described the private rented sector as like ‘the wild west’.
Dromey said the RICS “are not the only surveyors” with this opinion. Prisk had, when in opposition, tabled an amendment to put letting agents on the same legal basis as estate agents.
“I agree with him,” Dromey declared. “The question is, does he agree with himself.”
The Government’s stance yesterday in the Commons reflects its position last week in the House of Lords, when it made it clear that it would not support Baroness Hayter’s attempts to get letting agents recognised in law as estate agents.
Andrew Gwynne, Labour MP for Denton & Reddish, spoke of his cousin Alison, a mother of two whose marriage had broken up. He had been with her to various letting agencies two weekends ago, but as soon as the words ‘housing benefit’ were mentioned, agents closed their portfolios and all that was available was poor-quality accommodation “at extortionate prices”.
One Tory MP who did support the idea of longer, ‘more family friendly’ tenancy agreements was Jake Berry, for Rossendale and Darwen. He suggested six-year terms with rent reviews and rolling break clauses. But, he said, it wasn’t necessary to change the law to achieve this.
Labour lost their proposal by 292 votes to 225. The Government's amendment was passed by 284 to 220.
Yesterday’s debate was at short notice, but housing charity Shelter lost little time in mustering support, asking its supporters to email their MPs.
Shelter said: “Private renting is the worst of all worlds. Rising rents. Poor conditions. And soaring letting agent fees.”
A Shelter blog on Homes for London stepped up the pressure by saying: “Letting agent fees are out of control.”
http://tinyurl.com/aceqnou
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Comments
Some never learn - never ask governments to control you.
Do they want everything for free, finding good tenants cost money. What do they want us to do live on peanuts. Have they ever seen right move and zoopla costs, staff, stationery, offices, just basic overheads. I paid a few grand for borrowing money from the banks. Application fee of a few grand to get another mortgage and then % interest every month. if tenants dont like it Shelter should tell them to go on gumtree
Ray Evans - ‘More laws are not needed; the existing ones should be applied rigorously’
A subjective view that flatters to deceive Ray, probably why it takes an outsider like Industry Observer to cast an unprejudiced eye and concur that we need help.
We hold a privileged position with exclusive access to client finances, properties and confidential information and yet any individual may operate as a Letting Agent. A situation compounded by thriving opportunity to go about the business of defrauding all and sundry unabated and even when discovered, prosecuted and given a custodial sentence, on release the opportunity to begin again presents itself like an open embrace, a welcome back.
Unlike our brethren the Estate Agent who are held to account, by law for every aspect of their duties and conduct, from handling client money to the wording of information they give out, our industry’s lack of governance is disturbing.
To suggest that ‘there’s nothing to see here’ and to inform any rubberneckers that it’s all Westminster’s fault is pretty juvenile. Our defensiveness is honed from a seasoned attack but instead of accepting there may be valid reasons why we are targeted you turtle up and play the victim.
To declare that there are adequate existing laws to deal with any situation that may arise is obtuse in its extreme and cynical at best. Prevention is better than cure Ray so stop trying to stick a band-aid on this and start thinking about vaccinating the problem at source.
Suck it up Mr Evans, as much as we try we can’t regulate ourselves. We’ve shown this to be true as we stumble along incurring everyone’s ire. Funnily enough the irony is that as we continue down this road without proper legislative guidance it will eventually leads us to exactly that.
Ah I remember the halcion days when the RICS standard scale fees were 5% on the first £500 - 2/12% on the next £4,500 and 1.5% on the balance. We used to make good money then. A joint agency was 1.5% of the fee split evenly between the 2 agents i.e. the one instructed and the one who made the deal.
Then the children came along and decided they could do the same job (ha ha) for 4/5 of bugger all and created a fee war. This continues today with high values and false fee structures of a fixed fee based on the inflated initial offering price.
Where there is no legislation in the letting sector agents are creaming it in so lads, you only have yourself to blame if Shelter get their way and we might as well just shut up shop and join the dole queue and rent a property thats if you can get DSS to fund it.
There is no such thing as a little legislation.
HMO licensing in Scotland was meant to stop overcrowding and ensure minimum safety standards.
Now safety standards are set at an aspirational level and some councils are insisting on carpets in all HMOs even if there is no issue with noise.
We need to stop letting Shelter drive the agenda. It is depressing that the best you can ever hope for is the status quo.
There are lots of issues that landlords face that need to be addressed by politicians and we need a body to be pressurising the govt. to address these issues.
@Tough Love on 2013-01-24 15:24:17
Totally disagree with you and stand by what I said.
'Crass' to blame others? Note recent legislation in all fields - a mess. Sales; Yes SOME legislation was needed but a lot was 'over the top'
I repeat - Some never learn - never ask governments to control you.
@Industry Observer on 2013-01-24 16:29:31
I do not think he is anywhere near spot on. However, we cannot always agree can we and I like to create alternatives! ;>)
Stephen Seymour
How many shops in your locale charge different prices for their beans?
We live in a free market - only I'm in Scotland, so we dont!!
@ Ray Evans and Tough Love
Not often I disagree with you Ray and here it is only obliquely but Tough Love is dead right in both his posts. Spot on.
In terms of ther MP "not knowing" what a fee was for my money is on her being told what it was for but not understanding how on earth money could be charged for whatever it was being paid for.
@Scotty Boy
There has been some Committee or Review Body or something looking at tenancies and leases for about 10 years now - may even be the Law Commission is that where Professor Partington is?
They are charged with seeing if it is possible to reduce the 15+ types of lease/tenancy down to no more than 4 or 5 and make them standard.
It would also include an Assured Longhold option, 5 year term but tenant took on some of the repairing obligations (like changing light bulbs and getting rid of flying ants in the garden I assume!!). As nothing more has ever been heard from this Commiittee I assume they are hiding in the long grass.
When did Estate Agents become like Persil "Whiter than White". It's a pity the publics perception is somewhat different.
How many Agents in your locale charge different fees for services?
Don't absent responsibility Ray, we are culpable for much of this mess. Legislation was needed for sales and clearly we havent learned from our mistakes. You can't deny whats staring you in the face and its crass to blame others. Face it, the current system, whatever that may be, doesn't work. Time for change...
"MP, Rosie Cooper, using parliamentary privilege, named a lettings agency in Lancashire for its ‘appalling’ practice of charging tenants £200 for a credit check, which tenants then failed"
Fair play too much money for a credit check, however if a genuine credit check is done and the tenant fails, tough. We have to protect our landlords investment. MP's once again showing their true self serving 'jump on the band waggon' colours. As for shelter, they really should be ashamed of themselves.
Did the right honourable MP's ask why many agents turn down Housing Benefit Cases? would it be because many local authorities treat letting agents with contempt and also insist on paying Tenants direct, not dealing with arrear and freezing payments without notice, leaving landlords high and dry?
Andrew Gwynne MP said agents closed their portfolios to his cousin Alison when she said she was on Housing Benefit.
Did he bother to ask why? If so he'd have got a very simple answer - because that is what their landlord clients instructed them to do, and the agent is legally bound to act on his clients instructions.
if he'd grasped that and asked why many landlords don't want HB tenants he'd have opened up a whole new can of worms.
We love it when Leicester City Council write to us telling us they'd like to work more closely with the private sector and inviting us to forums and meetings - whilst at the same time advising tenants who are many months in rent arrears to sit tight till the bailiffs arrive and giving them free legal representation to get applications for possession orders thrown out on technicalities.
@Tough Love on 2013-01-24 12:14:56
So you would like MP’s, many with the 'nous' of Liz Kendall, to enact legislation to control the industry would you? Have you not observed the mess caused by those ill informed people in Westmisnster and Whitehall during the last few years? More laws are not needed; the existing ones should be applied rigorously, to include prison sentences.
Some never learn - never ask governments to control you.
The anti agent bandwagon is one which the public love - and which gives Shelter headlines and perhaps more donations.
Ironically, this campaign may well lead to increased rents as experienced in Scotland rendering some unable to afford a property which, by a cruel twist of fate, could increase homelessness......
Just a thought
Is Shelter not a Charity set up to help the homeless?
I'm not aware of Letting Agents setting up business for that purpose nor after 25+ years in the industry have I been approached by Landlords who feel they are duty bound to purchase properties to help Shelter.
After years of failing to get successive governments to act Shelter now have a new target called Letting Agents. Perhaps we should all close down and go and get a job with them using our expertise.
Perhaps Shelter should look at the mortgage terms of Buy to Let Mortgages and ask why they discriminate against Housing Benefits instead of making complaint against Landlords and Agents who have no say in the matter.
Shelter aim for tenancies will be to push them back to the days before the 1988 Housing Act back to statuory and protected tenancies where tenants will decide how long they want to live at the property not the owner and rent increases will be as rare as a snow in the Sahara
Sounds like a typical debate on the PRS:
Shelter have their agenda heard, landlords and letting agents are not represented.
In this environment half truths become facts and in my opinion letting agents were fortunate to win.
I agree. I receive enquiries on a daily basis stating -
"I do not have a deposit, I claim benefits and I cannot afford to top up the rent"
and guess what -
"sent from my i phone"
Grrrrrrrrr
"During the lengthy debate, the Labour MP for Leicester West, Liz Kendall, said she had done a mystery shopping exercise on letting agent fees. She said these were unfair, and one agent was charging a fee for what, she said, she didn’t know."
This woman is an MP yet did not ASK what the fees were for so HOW does she know they were unfair? Is that because she said so? I think paying MPs second home and travel expenses is unfair because nobody else is allowed to claim fro travel to their workplace!
From Milliband down the latest "buzz word" is rip-off agents fees. A nice catch phrase to beat agents with but how many of them have ever run a business? How many of them have asked an agent what their COSTS are? Typical hot air from empty heads but sadly they are in a position to ban fees for tenants. All that then will happen is landlords will load rents to cover the extra costs.
Letting agents are running businesses NOT charities.
Our industry is rife with disparity in fees and service, borne from the lack of regulation. We may have been ‘given an inch’ but the irony of a government that refuses to act and then laments with incredulity the current state of affairs is staggering. That doesn’t mean it’s ok for us to shelter behind their failure to make good choices. It may be seven shades of sh*tty right now but at least they’re trying to bring it down to two.
Different businesses with different plans will spawn different fees; it’s an accepted principal. It doesn’t however extend to fees that are not commensurate with services and the arrogant ‘take it or leave it’ attitude or the unsavoury attempt to disguise it, as a means test of the tenant is galling. There’s no placebo effect, this is real and it’s happening right now so be mindful in honourably defending our industry that you do not defend the rogues and their practices that exist in within it. We can’t assume the higher ground and harmonise about the need for a minimum standard service level, ARLA et al and then drop to the lowest level in excusing the less than ethical. It may only be a minority but just one bad agent is one too many.
The realisation is we can’t regulate ourselves, we can’t ask the public to hold our hair whilst we throw up on their shoes. Our conduct in sales was similarly less than stellar and legislation addressed that so like it or not reform must be taken out of our hands. Until then, our reputation and industry will be held to ransom by the cowboys it tolerates, wild west indeed…
Shelter said: “Private renting is the worst of all worlds. Rising rents. Poor conditions. And soaring letting agent fees.
Get a grip with reality Shelter you really ahve no idea about the real world.
1) So if you can't afford a mortgage they are suggesting it is better to be a 40 old Virgin and live with mummy and daddy at home than to be renting! Or instead just scrounge off the state.
2) If people gave up buying unnecessary products (60 inch TVs, £40k cars, 20k holidays etc) people could save and get a mortgage. If they still couldn't get a mortgage we'll thes just tough luck, but guess what Life isn't fair!!!
Shelter said: “Private renting is the worst of all worlds. Rising rents. Poor conditions. And soaring letting agent fees.
Get a grip with reality Shelter you really ahve no idea about the real world.
1) So if you can't afford a mortgage they are suggesting it is better to be a 40 old Virgin and live with mummy and daddy at home than to be renting! Or instead just scrounge off the state.
2) If people gave up buying unnecessary products (60 inch TVs, £40k cars, 20k holidays etc) people could save and get a mortgage. If they still couldn't get a mortgage we'll thes just tough luck, but guess what Life isn't fair!!!
If you missed the debate last night (or suffer from insomnia) & would like the full text of who said what to whom then it's here;- http://www.theyworkforyou.com/debates/?id=2013-01-23a.378.0&s=speaker%3A10576
We keep hearing about all these Rogue Agents could any one tell me how many Agents were prosecuted last year?
In Bristol where there are over 200 Agents no one has been prosecuted for fraudulent practices in the last 3 years. Is this typical?
@lettng25
Hi guys n gals -
Dont miss the other point here - "calling for tenants to be given secure, longer term tenancies" - hmmm - in Scotland now that Shelter have successfully outlawed tenant fees, they (Shelter) are now calling for the abolition of the SAT to be replaced with a longer term tenancy.
And yes R.E. - Zoopla still donate a substantial sum of our money to Shelter.
Zoopl'a charity for last year was shelter. They held a Golf Tournament and asked that you donate £50.00 to Shelter.
@SWT on 2013-01-24 09:02:10
You are NOT an estate agent. A letting agent is a different, and very important discipline - promote it and be proud of it.
So this Liz carries out a 'mystery shop' and there was a fee but she didn't know what it was for??!!
Did you not thnk to ask??!!
Yeah brilliant research, you done really well!!
As a letting agent, I WANT to be recognised in law an estate agent, so that we can ensure rogue agents are shut down for good, not just banned from esate agency and free to open up, or work in another lettings business!
Kick up a fuss. The clocks ticking when political parties will be wanting votes again in just over a year.
Agents need to earn a proper fee, else landlords can lose out on proper service levels. Which brings to the table the fact that main portals in England and Wales are still letting budget agents in. Showing free private ads next to agents adverts. The budget boys offer low cost or free landlord property ads by the hundreds in return for application fees.
http://www.visum.co.uk/property-advertising/landlord-advertising.aspx
http://makeurmove.co.uk - free tenant find on main sites - shows RM and zoopla logo's
Now could we encourage Nick who did a great job with Splinta and HIPS to challenge main portals over not placing private landlord ads next to agents, whilst others voice to the politicians and the Lords.
Do Zoopla (i.e. the agents!) still give money to Shelter?
How many MP's got banged up for 'unfair charges?'
Most agents are very fair and open. There is a minority who aren't but whilst Landlords go for cheapest fee over anything else, it will always be so.
If the lettings sector is like the 'wild west' - god help us if the RICS are intending to play sheriff !!
The lettings market is not the wild west - just like any other industry, sector or walk of life, it is more akin to a barrel with a few rotten apples. Now please excuse me whilst I go hide in a corner of the barrel
'Liz Kendall, said she had done a mystery shopping exercise on letting agent fees. She said these were unfair, and one agent was charging a fee for what, she said, she didn’t know.'
Did she ask, or would she have blindly signed a legal contract without understanding it ? Has she not heard of the Office of Fair Trading unfair contract terms, or the myriad of other regulations that already impose over the top regulations to protect tenants ?
Lets get the basics right first.
No regulation will have any effect whilst the Courts fail to punish the criminal element.
If the Government doesn't want more 'red tape' then fine - but give the consumer teeth when wronged as I have discussed in my blog.
http://www.lettingagenttoday.co.uk/news_features/Eric-Walker-Blog
If you don't like it take your business elsewhere. If you can't afford go pay it your not a suitable tenant anyway.
And the day I, or any estate agent, starts taking comments from homeless charities like Shelter as fact are a long, long way away. Speaking for everyone other than our customer base. Hardly likely to be fair are they.