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Letting Agents Cashing in on Landlords and Tenants
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Landlords have been accused of cashing in on tenants who are anxious to secure a property after an increase in rents. However, it is not just landlords making money from the desperate renting generation; letting agents are cashing in on landlords and tenants too.
A letting agent can be hired by a landlord to either just find a tenant, or fully manage a property and organise rent, maintenance, and any tenants’ issues.
For only finding the tenant, a letting agency charges around 10% of the annual rent, and the full management option is 15%, excluding VAT.
If the landlord chooses the full management package on a flat raising £800 a month in rent, they would pay the agent £1,728 a year, including VAT.
However, fees do not end there. There are extra costs for: contracts, inventories, credit checks, references, checking in and out of tenants, visits to the property, and registering a deposit. These charges can amount to hundreds of pounds, some charged to the landlord, and some to tenants.
The additional charges, typically for conducting routine business tasks, regularly bear little or no relation to the worth of the work involved, says Citizens Advice.
Moira Haynes, spokesperson for Citizens Advice, explains: “Many letting agents routinely rip off tenants by imposing unjustified and excessive charges and providing a poor or non-existent service.
“In some cases letting agents appear to make them up as they go along. These charges can be a huge barrier for people on low and even average incomes who have no housing options other than the private rented sector. They should be banned.”1
Letting Agents Cashing in on Landlords and Tenants
With the full management option, all maintenance jobs are contracted by the letting agent to appointed trade individuals. The landlord pays for these separately. Some agents even charge for waiting times of tradespeople, for example, if an electrician chosen by the agent is late, the landlord has to pay extra.
At the end of a contracted period, the landlord is charged a renewal fee, whether the letting agent played a part in negotiating a contract renewal or not. Additionally, agents are often eager to increase rents, which would raise their commission and create struggles for already fraught tenants.
Letting agents charge £200 or more for an Assured Shorthold Tenancy (AST) agreement. Despite this, an AST can be downloaded for free online.
London-based company Kinleigh Folkard & Hayward (KFH) charge £130 to the landlord and tenant for a contract (£260 in total).
Group Lettings Director of KFH, Carol Pawsey, says that this document, approved by the Association of Residential Letting Agents (ARLA), is much more logical than documents from a legal stationers, or one found online.
She states: “The contract is to protect our client, the landlord, and to ensure he can gain vacant possession at the end of the term, and it is therefore vital that it is both comprehensive and includes clear contractual terms.”
Of charges from KFH include £48 for credit checks, which start at £15 online, and £25 to put the tenant’s deposit in an acknowledged deposit protection system, despite the Deposit Protection Scheme (DPS) being free.
KFH’s competitors, Pedder, charges a landlord agreement fee of £200 upfront to landlords, and £270 to tenants to cover a contract, credit checks, and references. Inventories are a separate cost, of £170 to the landlord at the start of the tenancy, and £90 paid by the tenant at the end.
The lack of regulations in the letting sector is of significant concern to Citizens Advice. Anyone can set up as a letting agent, without a need for professional expertise or experience. However, some do become members of the voluntary self-regulating organisation, ARLA.
Nonetheless, ARLA doesn’t limit or monitor what their member groups charge landlords and tenants for administration.
Ian Potter, ARLA’s Operations Manager, explains: “As an organisation we cannot dictate to our members what fees they charge as there is legislation that requires free competition in a market. Certain fees were challenged by the [Office of Fair Trading] OFT and the issue of unfair fees is covered under the Unfair Terms in Consumer Contract Regulation, but these do not go as far as setting the level of fees.”1
Emily Conrad-Pickles, 29, has experienced letting agents as both a landlord and a tenant, when she rented out her flat in London after a move to Newcastle. The agency in London took only 48 hours to find a tenant.
She says: “The next day, they made an offer and I decided to take them on. For no work whatsoever, the agents took 12% of the first year’s total rent as their finder’s fee, so basically doing nothing.
“On the plus side, they did organise proper contracts for me, but everything else, such as inventories, was an added cost which I went without. I feel a bit of a mug for paying so much money.”
Living in Newcastle, Emily found that the letting agent she was renting her flat through were slow and unprofessional in dealing with problems.
“When you consider that they are probably taking a good 20% of the landlord’s annual income from the property each year, it is an absolute rip off,” she concludes. “I really feel sorry for our landlord who is tied into a contract with the agents and wasting his money.”1
