Housing charity Shelter has broadened its attack on upfront fees charged by letting agents.
Shelter already has an active campaign under way in Scotland, where upfront fees are illegal, but it has now launched an attack on lettings agencies in Wales.
The timing coincides with the move by the Welsh government to introduce compulsory licensing for both agents and landlords – a move that could set a precedent in the rest of the UK.
Shelter Cymru carried out a mystery-shopping exercise with letting agents across Wales to investigate fees and charges and how they vary between agents.
Agents were asked about the costs of setting up a tenancy, deposits required, the upfront costs of renewing a tenancy, charges for credit checks, late payment charges and any other fees or charges.
Researchers found that some tenants could be charged as much as £594 in set-up fees for a property at the average market rent.
It means that as well as finding one month’s rent in advance and a deposit usually totalling a month’s rent, prospective tenants needed to find additional fees and charges of around 45% of the monthly rent. With some agents, this sum could be as high as 120%, says Shelter.
Additional charges included fees to renew contracts, check-in and check-out fees to hand over keys and check inventories, and non-refundable pre-contract administration fees for everyone who applied for a tenancy regardless of whether their application was successful.
John Puzey, director of Shelter Cymru, said: “You have to question how reasonable these charges are when credit checks can be carried out online for £20 and tenancy agreements are usually standard template contracts.
“These kinds of unregulated charges, which are now actually illegal in Scotland, are making the private rented sector even more unaffordable at a time when many people in Wales are already struggling to find and keep accommodation.
“In addition, we found that most charges were not well advertised so prospective tenants are often unable to discover the true cost of setting up a tenancy until they are well into the process of making an application, by which time they may already have handed over some non-refundable payments.
“Some agents charged a flat administration fee to all tenants, while others varied the fee depending on the rent level, raising the question of why the amount of administration work should depend on the tenant’s choice of home.
“This lack of transparency traps people into paying additional fees as it is almost impossible for them to make an informed choice when they start the process of renting a home,” he added.
While a minority of agents published the costs of setting up a tenancy on their websites, the researchers found that with the majority this information was very difficult to obtain without asking very specific questions of the salespeople.
The Property Ombudsman’s Code of Practice for Residential Letting Agents states that agents should flag up any potential liability for fees, charges and penalties ‘prior to an applicant’s offer being formally accepted’.
But Shelter said that this is a very late stage in the process, by which time many tenants may have already committed money in the form of administration charges or holding deposits. The charity says that disclosure of fees post-application means that tenants are unable to exercise consumer choice in this area, which removes any incentive among agents for competitive price-setting.
Puzey highlighted the proposals in the Welsh Government’s Housing White Paper for the compulsory accreditation of private landlords and letting agents in Wales and urged the Government to ensure that the forthcoming Code of Practice includes clear standards on transparency in agents’ fees and charges.
He said: “The private rented sector is a significant and growing element of the housing market in Wales and so we need to ensure that agents operate to the highest standards.
“We hope that accreditation will lead to greater transparency and a more efficient rental market for tenants, but if this does not happen then maybe a total ban on premium charges should be considered.”
The Shelter research in Wales showed that two adults renting a three-bed property pays a total of £1,448 in upfront fees on average, while two adults in a two-bed property pay £1,295 and one adult in a one-bed property pays £1,054.
Plaid Cymru’s housing spokesperson, Llyr Gruffydd AM, said: “Shelter Cymru’s research highlights some very serious concerns about the hidden charges people can face when renting a home. Plaid Cymru now wants to see some swift action on this issue from the Labour Welsh Government.
“At a time when the Westminster government is reforming housing benefit in a manner that will increase the amount of families looking for a new home, it is crucial that the Welsh government mitigates this by tackling the excessive hidden charges that tenants in the private sector face.
“While we welcome the Welsh government’s promise to tackle these hidden charges through new legislation on tenancy reform, we are concerned at the apparent lack of urgency. For many Welsh families, action needs to happen now. Bringing forward their proposed legislation on tenancy reform, rather than delaying, is an example of practical action they could take now to stand up for Welsh families.
“I urge the Labour Welsh government to stand up for Welsh families by taking swift action to tackle this problem.”
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Comments
As has been said here landlord's don't need agents and tenants don't either. What we do give is a service and protection for all concerned. Tenants need protection from stupid landlord's.
If tenants don't like our fees they can go elsewhere.
Had one who made me an offer on my admin fee for credit searches and I went elsewhere for a tenant. Told the landlord I was and when said twit rang and said he had not heard from me I told him he wouldn't hear from me because before he even got the property he was arguing. That would never stop. He did not like that one bit. He had to then go tell his wife what he has screwed up on and why.
I laughed all the way home.
Like many have already said, somebody needs to pay for the administration and these fees need to be charged.
However, some agents do charge a lot more than they need to through sheer greed.
When we set up business, we mystery shopped all the local agents to help with our pricing and was amazed at how much they differ. I am now aware that some agents do charge for several things and some just charge once to cover everything.
I have no problem justifying our fees, but some agents will have problems.
I am all for some form of regulation which is something that Shelter are pushing for and I believe it could benefit most agents, plus it may help to weed out the rogue agents that give us all a bad reputation.
The problem is I don't see how fees structures could be regulated because not all agents are alike.
Maybe Shelter should name and shame the agents that they believe charge too much and give agents a chance to hit back.
The person signing themselves "InBusiness" made a throwaway comment at the end of their posting which is actually very pertinent.
Supermarkets, and indeed all other food stores deal in something which, like shelter (with a small "s") is essential to life. Food stores charge the consumer a higher price for this essential than they pay to the farmer. This is a charge borne by the consumer. It covers the food store's costs and enables them to make a profit. People don't have to pay supermarket prices of course - they could buy direct from a farmer's market or whatever.
Has everyone spotted the analogy with what a letting agent does? Rather than go directly to the provider for one of life's essentials your local letting agent offers a middle-man service which many consumers find preferable or simply more convenient and earns a living from providing this service.
Using Shelter's logic supermarkets should supply food at cost price and charge no mark up.
I also love the spin Shelter appear to have used at the end. Having said "fees of up to £594 were charged" early in the article they then refer to "up-front fees of £1,448 on average". That'd include the rent and deposit then presumably? Strip the rent and deposit out and it sounds far less dramatic. Or do Shelter think tenants shouldn't have to pay rent either?
Everybody has an angle on this subject dependent upon your position, so it is competely subjective.
Shelter should become a letting agent and then see where they stand. Ha!
I love the way letting agents try and justify their charges!!
A landlord can find a 'notice serving' service for a lot less than £400, as quoted by 'London Agent'. I think your find that most of the good landlords and tenants are subsidising the bad landlords and tenants for which 90% of the letting agent time is spent!!
Landlord's don't need agents. If they choose to use one they should bear the cost.
When we started out several years ago we launced with a tenant pay no fees approach. It helped us define a decent market share, but it was unsustainable, we made no money at all, infact we made losses.
We had several landlords who told us they were attracted to our approach, but i would suspect more were put right off, thinking we'd be charging them over the odds.
If it was an accross the board approach, and all agents changed their structures and only charged landlords, it could work. But rents would have to rise, the tenant wou.d not see a benfit. Most landlords have mortgage commitments and other expenditure and unlike shelter, and not charities.
Surely its fairer that those who move often pay higher admin fees than making all tenants pay more rent?
I would be willing to bet the fat cats at shelter take home a higher wage than I do as a small business owner. So where do they propose these fee cuts come from? Should we sack all our staff and open up third world sweat shops to do our administration work?
I wonder if they will be targeting the upfront fees for mortgages next? or the deposits on new cars? how about having to pay brokers fees on insurance?
Are any of these people ever capable of joined up thinking?
Where will tenants go if the majority of agents decide to shut up shop rather than cut their profits to the bone, the local councils? they can't cope now.
I agree Ray. The key distinction here is Business or Charity. We come up against this argument all the time from tenants. We are not unreasonable with our charges but somebody has to pay for our time, offices etc.
I am all in favour of charity and help where I can but if all businesses adopted the suggested model of not marking up fees then shelter may have a few more homeless people on their hands.
Next they will be complaining that supermarkets by tomatoes at one price and then add a margin on top!
Shelter provide 'free' advice to tenants but there is an administrative cost involved in employing staff to answer the telephone and e-mail enquiries. Unfortunately Letting Agents are not charities and do not receive donations so we have to recover the cost of processing tenant applications in some way otherwise we would not survive. It would be interesting to know what Shelter pay their staff and the actual cost of dealing with each enquiry.
Dear John Puzey
Dont use an agent then. Its not compulsory. And when it all goes wrong and you have to spend £1000's on a lawyer then you can ask them how they charge £400 for serving a 'standard' notice we issue for nothing.
Better still, but a tenancy agreement on line. One of our clients did 0 great - until they failed to get possession due to missing clauses and there is no redress.
Best of Luck
Funny the lack of knowledge.
Tenancy agreements may be templates, but they need regular updating or Shelter would be the fist to moan they were not compliant.
Tenants want agents with CMP, PI Insurance etc. As regards online credit checks - really? They are often poor.
We had a landlord who 'saved money' right up until the point it all went wrong.
"John Puzey, director of Shelter Cymru, said: “You have to question how reasonable these charges are when credit checks can be carried out online for £20 and tenancy agreements are usually standard template contracts".
So, who pays the administration costs? You?
If it is the Landlord (in addition to his share) rents will go up.
Administration costs in time etc. , so, who pays?