Labour bids to end letting agent fees 'scandal' in private rented sector

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

Labour has vowed to tackle the unregulated lettings market in the private rented sector and is considering setting up a regulatory body with enforcement powers to end the “scandal of rip off fees”.

The private rented sector now consists of 3.6 million households in England, and on current trends, is expected to house more people than the social rented sector from next year.

It says the growth - emphasised by the fact that nearly a third of all private rented sector households are now families with children – has brought with it a boom in “unscrupulous” agents, some of which encourage landlords to replace tenants regularly so they can earn extra fees.

It has today launched a policy review document which will feed into the party's policy programme highlighting its areas of concern and potential options being considered to tackle the problems.

Hilary Benn MP, Labour’s Shadow Communities and Local Government Secretary, said: "We need a professional lettings market in which unscrupulous agents can no longer hit landlords and tenants with rip-off charges. The private rented sector should provide stability both for families who want to plan for their children’s future and for landlords who want to invest for the long term."

Estimates – highlighted by the party – suggest there are more than 4,000 managing and letting agents that are entirely unregulated.

The review says: “It is a peculiarity of current policy that while estate agents, who hold very little money on behalf of their clients, are regulated, letting agents who hold significant sums on behalf of landlords and tenants are not.”

It also highlights a Citizens Advice Bureau survey of letting agents which found that 94 per cent imposed additional charges on tenants on top of the tenancy deposit and rent in advance.

It’s concerned with the disparity in the level of fees and that they’re often hidden in the small print.

In one case a tenant who moved into a one bed flat near Essex Road, London had to shell out nearly £4,000 in advance, which included: admin charges, a “check-in charge” referencing, deposit and a month’s rent.

It’s also concerned some agents, large and small, have no client money protection system in place and that it’s possible to set up an agency without qualifications and requirements.

Labour said it will consider different models to improve standards with potential measures including a code of code of conduct with entry requirements for letting agents and compulsory business and consumer protection measures.

It will also consider how compliance could be monitored, for example by a regulatory body with enforcement powers.

It also wants to end the “confusing, inconsistent and opaque fees and charges regime” and wants to see a regime where fees and charges are easily understandable, upfront and comparable across agents.

The review said: “We will assess the level and extent of activities that can be charged for, including the size of deposits required in proportion to rent and the level of ‘administration’ fees for basic services, such as those for swapping, renewing or editing contracts.”

Jack Dromey MP, Labour’s Shadow Housing Minister, said: "A million families live in the private rented sector. We want to ensure, particularly in these tough times, that they can be confident their money is safe and that they will get a fair deal. There is no place for unscrupulous agents who rip-off tenants by charging them fees they didn’t know they would face and who exploit landlords and tenants alike by failing to protect the money they hold for them."

In response to the review, Richard Lambert, Chief Executive Officer at the National Landlords Association (NLA), said: "The NLA believes that landlords and tenants should be able to expect certain provisions when using a letting agency to ensure transparency, fairness and a degree of consumer protection.

“Our advice to all landlords is to look for agencies which have a commitment to Continued Professional Development (CPD), comprehensive Client Money Protection Insurance (CMPI), Professional Indemnity Insurance (PII) and have elected to abide by a respected industry code of practice.

“Currently, these features are only available by means of membership of a recognised trade body such as The UK Association of Letting Agents (UKALA), The Association of Residential Letting Agents (ARLA), National Approved Letting Scheme (NALS) or the Royal Institution of Chartered Surveyors (RICS).

“The NLA would welcome more agencies proactively seeking out these organisations in order to provide the kind of consumer protections and assurances which landlords and tenants need to work and live in the private-rented sector.

“However, if the industry can’t provide confidence to its consumers, it has to accept that some form of regulation will inevitably follow.”