Tenants across the UK have complained that they feel ripped off by letting agents, it has been claimed.
Self-service online agent Upad conducted a survey, which was nationwide with a special emphasis on Scotland, where Shelter has an ongoing Reclaim Your Fees campaign.
In Scotland, agents are not allowed to charge upfront fees, but Shelter says that some have been made to pay for unlawful services. As a result of its campaign, around 870 people have begun legal proceedings.
The Upad survey asked tenants across the UK what the most pressing issue was nowadays and discovered that high deposits and getting them returned was one of the biggest factors.
A significant proportion of tenants claimed that they were made to pay a 12-months or longer deposit.
The survey revealed that while 73% of respondents across the UK rented property through a lettings agent, 93% of this number felt they were being charged sky-high fees, and 79% said that the level of service they received did not reflect the fees they paid.
One respondent said they paid £444 for a very slow reference check.
When asked how much they paid to move into their current property excluding rent and deposit, a number of respondents said they paid up to £5,000.
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Comments
That agents impose fees on tenants is a scandal. Agents only get away with it, as folk want to move in and no pay = no deal. With the way that agents talk up the rents (to engorge their fees), this is market failure if not market abuse and is ripe for a review by the competition authorities.
As for the fees:
First, there is no contractual relationship (actual or implied) between the agent and the tenant. The agent acts for the landlord. The tenant has not commissioned the agent to undertake any work. If the agent acts for both, there is an obvious conflict of interest. To whom, for example does the agent owe the duty of care?
Second, letting a property (ie being a landlord) is a business, no different from, say, running a greengrocer. Any business incurs costs, be it buying fruit 'n' veg wholesale or drawing up tenancy agreements. These costs are normal business costs to be borne by the business and set off against tax. It is for the supplier (landlord or greengrocer) in a competitive market to decide whether or to what extent to recover these costs from the tenant.
Third, the description of the fees is risible: "cheking in fee", "checking out fee" and so on.
Finally the level of the fees verges on usury. With deposits and fees, I had to pay the tick end of £6k last year to move into a modest semi in south London. The work done by the agent amounted to little more than filling in a form (incorrectly) and pressing the 'Print' button.
as agents surely we provide a service to both landlords and tenants. We charge landlords for marketing the property and we charge tenants for the process of letting the property.
I fully understand the argument about fees, there are 23 letting agents in my town and we are the cheapest for tenant fees. i know of 1 agent who charges £300+VAT per person!
I dont think it is viable to NOT charge tenants but i think we should all look at what a reasonable fee should be for the service we provide to tenants.
Maybe there should be a set buffer across the board for example admin fees charges can be between £50-£100+VAT and no more.
I do think though, that until the industry is regulated as a whole we will always see agents trying to make a buck wherever they can, and why not it is a business after all and if you can get a away with it i can see why agents would do it.
Do any tenants ever consider that whatever is charged, 20% is VAT and an agent has no control over that!
I know of an agent near me charging £200 'admin fee'.. that will be for the 'word' produced contract, and £50 per person credit check.
So a family of 4, all over 18 will indeed be looking at £400 + vat for their application.
It should be outlawed.
Regulation needed.
The agency I work for charges £25 for their referencing wether it is a full tenant reference or a credit serach only and with the amount of people failing the checks we would be losing money every month with having to pay for people to fail a credit check. When we inform tenants of this we usually get a good reaction from the tenants saying thats great i was charged £200 by my last agent.
I myself rent a property and when it came to referncing the agent told me it would be £100 for the check and £40 to draw up the lease. I told him I would be happy to pay £25 for the check as I knew it wasnt going to cost him any more than that and that I wasnt paying the £40 as that was definetley not legal. He said he couldnt do that.
A quick call to the manager and I didnt have to pay a penny for the check or the lease.
I think UPad need to ditch their marketing team. On what planet is it a good idea to preach to agents that their fees are too high. Agents who charge extortionate fees will lose landlords or tenants so if they want to charge that let them, this will mean more clients for the rest of us. If you want to pick up some clients UPad you need to be preaching to landlords and tenants not us agents.
This is very similar to the vegitarian survey that claimed Turkeys are allergic to Cranberry sauce.
Is it cynical to suggest that Upad might have worded their survey to create just such an outcome? After all it is their job to attract both landlords and tenants to use their services, what better way than to stir up the pot that traditional agents, those that have staff and offer a service might charge more than a company who operate on a shoestring and offer nothing more than an online advertising service.
Scotty Boy...thank you for confirming my theory. If the number of rental properties goes down (Supply), Demand will at least saty the same (tenants aren't suddenly going to be able to buy).
Thus simple economics means that prices will go up.
@ Industry Observer
There must be a formula that works for both landlord & tenant.
To top load fees to the landlord is unfair.
I do not ask my dentist to pay for my x-rays to retain me as a client. Why should a landlord pay referencing fees?
Do you remember the idiot Keshav Thukaram making headlines with;
http://www.estateagenttoday.co.uk/News/Story/?title=Letting%20agents%20under%20attack%20over%20'greed'%20claims&storyid=1747&type=news_features
He now wants to serve letting agents with his latest joke CERTIFI, no chance given the previous! When these jokers learn that the on-line stuff does not work they attack the letting agents, if this fails they want to work with us. I suspect they will continue to move from one business to another with a track record of failure!
Now Upad take over as the idiots, this article is not worthy of our time. Does Upad make any money? Check out their accounts........
Good letting agents provide good service at market rates for landlords and tenants; simples!
Whats my name????
Good theory but rental values are market driven and incresing rents beyond market value would result in extended void periods.
Ultimately, if all fees are pushed to landlords, they will look for alternative investments and rental properties will reduce in number.
If agents only charged fees to the landlord, this in turn would almost certainly push rents up and probably cost the tenant more in the long run.
I forgot to mention about the £444 fee.
On average fees in Swansea to tenants are generally half that and more. Much lower for an individual too.
I can only assume if they paid so much and it was slow, was that they had problems getting through the credit checks. Maybe they needed to pay extra for a guarantor check. I have seen some tenants go through 3 guarantor checks before gaining an acceptance, but they were made aware of the requirements to get through the referencing and have only themselves to blame for the increased fee.
What another ridiculous article.
I am sure £444 has been plucked out as the most extreme case.
But if that is the case, then also more fool the person for paying that amount as well. They should of done their research in the first place, they didn't have to pay it.
This article is complete nonsense and none of the quoted figures make any sense at all or would stand up to more sensible scrutiny.
12 months deposit? That would make it a Premium Lease. Who in their right mind demands a 12 month deposit (or pays one?)
@Scotty Boy
If all fees are always paid by Landlords there is nothing unfair in that except that it is the Landlord paying for everything. But then they are the ones that want the reassurance that the tenants are as cosher as they can be vetted to be.
Every 4-5 years this subject rears it's ugly head! It's just boring. Tenants get charged administration fees. As an agent you cannot charge over the market rate for these fees as then tenants will choose to use another agent.
Also Upad.
How do they provide a good management service, if they do?
Do they have somebody in every town/city to be a local manager?
From what I understand is that they have contractors in local areas that carry out maintenance and are probably the local property managers. If so, are these people trained or know what they are doing?
They charge £60 per month management or probably a minimum of £60, This is over 10% for Swansea due to the average rent being £525 per month and 10% is roughly what most agents in Swansea charge.
I totally agree with Michael, but even if you are using the same tenancy agreement Peter, then surely you need to counter in other costs. Ok, printing might be cheap especially if you use one of those on-line agreement templates that are about 3-5 pages long.
Our agreements are usually 14 pages. After printing you have to include time spent while dealing with the tenant which includes dealing with tenancy agreement, your terms and conditions, inventories, checking in and out processes, referencing, negotiating, keys, viewings and a whole host of other things.
It takes time and if you were not spending time with that tenant, you would be doing other work and business, so that time needs to be accounted for.
15% for management is very high, so I would imagine your landlords are not that impressed or do you not have many managed properties?
£5,000 excluding rent and bonds. Now that is a rip off.
"Tenants unhappy with sky-high agents' fees, claims Upad"
The figures quoted are ridiculous and would seem to have been used to sensationlise what was probably a one off. Who was the agent - if one was involved?
What does the average tenant think is 'sky high'? In over 35 years in the lettings business we charged what was a reasonable amount to cover legalities and labour but I I do not think I ever encountered a tenant who was actually 'HAPPY' about any fees or charges. It is a fact of life.
Micheal - I also see that you use Endsleigh and they are as cheap and nasty as they come so confused as to where you get your figures from.
Michael - The average price of a Comprehsive Tenant Reference is £18.00 approx, even less for volume.
We've not increased our Tenants fees in 3 years. We actually lowered them for 2011.
We're not the cheapest to Tenants or Landlords but we have 5 ARLA qualified amongst 18 staff and therefore provide very detailed and thorough checks plus a professional service which doesn't take 5 minutes. Many surveys received after every let, show how Landlords and Tenants think we're better than other agents they have used... You get what you pay for.
Peter, £25 for a ref check is ridiculously cheap so you must be doing a very basic online check and nothing else, leaving your Landlords open to risky tenants. And printing off the same tenancy agreement each time shows you have little idea about what you're doing. Each tenancy agreement is individual and cannot be the same every time, so needs time, negotiation and preparation.
We are no less professional than a solicitor in our approach, and so we need to charge more than £25 for our time in processing Tenants references. I don't drive a porsche 911 but so what if I did? We all want to earn a decent living and why should we not aspire to such things?
Upad - what's this about £5000 !!
Peter Hollins -
I agree that ripping off tenants is unfair and you may have a good balance with your volume of business.
But
The Scottish system loads ALL of the costs to the landlord including referencing fees and this cannot be fair. There has been a significant drop in property investment outwith the major cities in Scotland as the business formula does not work for landlords. Agents in remote and provincial towns are under pressure to create a formula that works for landlords by trimming fees.
Next year will see a dramatic decrease in rental property availability in Scotland and Shelter Scotland will have to seriously look at themselves as major contributor.
@ Peter
Sounds like your ripping off the landlord instead then?!
This is the problem isn't it. Many many agents will charge a lower comission % to the landlord to be competitive in the market. Therefore costs to the tenants can often be higher
Also though, if you are unhappy with what the agent charges - landlord or tenant, then don't use them. Use another agent Simple
That will be dishonest letting agents who have to keep up the loan payments on their Porsche 911!!!
£444 for a tenant reference that costs us only £21. Come on agents.....that's dishonest!
We only charge tenants £25 for a reference check.
The agreement is free as we just print the same template so can't justify charging a fee.
We charge the landlord 10% and 15% for management.
We do 50 to 80 lettings per month but ripping over tenants is morally wrong!!