MSE News: Letting agency fees 'truly out of control'

Charlie79

We have seen a property we like but we want to ask the landlord a few questions and offer less than the advertised rent. The agent wants over £400 from us before he will pick up the phone to the LL. If our offer is declined or we are not happy with the LL's answer to our queries and decide not to proceed we lose the holding deposit. We don't want to hold the property or have it taken off the market. I refuse to pay an agent over £400 to make a phone call!

ValHaller

princeofpounds wrote: »

I've posted it several times, but the market structure of lettings does not promote proper competitive forces.

It is heterogeneous, which is a fancy word for saying many houses very different and not easily substitutable. It is not normally possible, for example, to go for a 4 bed or a 2 bed if what you need and can afford is 3. Often search areas are very restricted for reasons like work, transport, schooling and so on.

It is illiquid, which is a posh word for saying it does not turn over that quickly. During the brief 6 week window you typically get for looking for a new rental (which may be made even briefer by the amount of time you can take off work), you may only spot a couple of properties. Sometimes those suitable properties are all with the same agent.

These two factors combine to make the market very oligopolistic. Which is a posh word for saying lettings agents are able to screw you. As a tenant, you often have little practical choice of which agent to work through.

Now I'm always very nervous of regulation. Although I'm a red-blooded capitalist in many ways, I do believe it can have a place because not all markets are free and equal in their inherent structure.

But I think a big start, one that is not economically distorting, would be for transparency to be enforced. LAs should have to declare their charging structure up-front and publicly to both T and LL, so that all sides are aware of their 'cost' in the process.

Currently most LLs seem blind to the fact that every £ the tenant pays to the agent is a £ out of the accommodation budget. Out of sight, out of mind.

And where T's really get stung is when the agent refuses to do some necessary and ultimately very standard work (such as contract renewal) without the payment of an arbitrary and extortionate fee (and usually without the LL's knowledge).

Good points. I would think that the market is far more liquid on the LA - LL side than it is on the T - LA side. So to me it is entirely logical to put the fees on the LL side. This might encourage LL's to exercise some discipline over LA's across a contractual relationship. The T - LA relationship is not contractual and leaves little scope for T's to mould the relationship to something more equitable.

bitsandpieces

princeofpounds wrote: »

Now I'm always very nervous of regulation. Although I'm a red-blooded capitalist in many ways, I do believe it can have a place because not all markets are free and equal in their inherent structure.

But I think a big start, one that is not economically distorting, would be for transparency to be enforced. LAs should have to declare their charging structure up-front and publicly to both T and LL, so that all sides are aware of their 'cost' in the process.

Most of these fees are currently unlawful in Scotland. No collapse in the rental market or anything.

I'm also cautious about regulation, but the most likely outcomes here seem to be either letting agents charging landlords more (and, if they need to levy higher charges, this can be reflected more transparently in the rent) or letting agents accepting tighter margins. Both would be an improvement on the current situation in England.

HAMISH_MCTAVISH

bitsandpieces wrote: »

Most of these fees are currently unlawful in Scotland. No collapse in the rental market or anything.

Rents shot up in the year after it started being enforced though.

Far more than the fees were previously, in most cases.

bitsandpieces

HAMISH_MCTAVISH wrote: »

Rents shot up in the year after it started being enforced though.

Far more than the fees were previously, in most cases.

Do you have reliable stats on that? ARLA claims that increases in some Scottish cities are a result of the changes - http://www.arla.co.uk/news/2013/1/rent-increases-in-scotland-in-response-to-change-in-fees-67104/ I'd be suspicious about them confusing correlation and causation, though, and focussing too much on a short-term blip in some stats for specific areas. For example, Countrywide's index shows a slight decline in rents in Scotland from 1st quarter 2012 to 1st quarter 2013 http://www.insidehousing.co.uk/tenancies/arrears-fall-while-rents-rise/6526559.article It's not clear that this has been pushing Scotland's rents up out-of-line with what what's happening elsewhere in the UK, or what you'd otherwise have expected in the region.

My guess is that the longer-term effects of this will become clearer over time. Landlords can shop around agents - so if some try hiking fees to LLs more than they're losing from tenants, I'd expect the market to do its job here. I'd take ARLA's claims with a pinch of salt, absent better evidence.

Aj86_2

I have found a very nice flat to rent, however I have just been quoted £240 for the agency to conduct a credit check (!!) I feel like I am being robbed - is this a reasonable amount compared to what others have paid? Is there any way round paying, short of not taking the flat?

DragonQ

Reue wrote: »

All 3 avoidable charges

Depends on the landlord. Mine implicitly trusts the letting agent so what the letting agent says goes, including fees.

Aj86 wrote: »

I have found a very nice flat to rent, however I have just been quoted £240 for the agency to conduct a credit check (!!) I feel like I am being robbed - is this a reasonable amount compared to what others have paid? Is there any way round paying, short of not taking the flat?

I've been asked to pay £380 inc VAT for credit checks, check-in and inventory. Strangely that was the same price for two people as it was for one...

twink22

We had to pay half a months rent in fees to the LA , we were not warned about it until after we had stupidly paid a £500 no refundable holding deposit, they are also trying to charge us £35 for every letter they write us! And £140 for a check out inventory. I flatly refuse to pay the charges for letters, I am waiting to see if they take us to court for it

lilychapman

My son with non working wife and baby are moving to a high cost rental area because of a job opportunity. They are living with me until they can save up for the deposit and first months rent etc. I now discover all these exploitative credit check fees (even though the wife will not have a credit rating and will not be responsible for the rent). The agents fees also include inventories and admin and because my son doesn't earn over £30,000 I have to be a guarantor for yet another fee. The cost if this is well over £500 for very little work and less than £100 maximum cost to the agent. I bet they wouldn't let me pay for the credit checks myself. These fees have only been introduced because estate agents have a captive rental market. The landlords are still paying the same fees that used to include all these checks. It's hitting the striving families hardest. How do young working families cope without the help of parents? What a scam!!!!

brenda10

lilychapman wrote: »

My son with non working wife and baby are moving to a high cost rental area because of a job opportunity. They are living with me until they can save up for the deposit and first months rent etc. I now discover all these exploitative credit check fees (even though the wife will not have a credit rating and will not be responsible for the rent). The agents fees also include inventories and admin and because my son doesn't earn over £30,000 I have to be a guarantor for yet another fee. The cost if this is well over £500 for very little work and less than £100 maximum cost to the agent. I bet they wouldn't let me pay for the credit checks myself. These fees have only been introduced because estate agents have a captive rental market. The landlords are still paying the same fees that used to include all these checks. It's hitting the striving families hardest. How do young working families cope without the help of parents? What a scam!!!!

My daughter rented and signed up to a 12month contract and 2 months rent was paid up front, then when 12 month contract was up instead of rolling contract, estate agent demanded it had to be renewed again for .......another 12 months, she refused, then they said 6 months she said no and agreed to a 2 month notice but had to pay the contract fee of £70, (she has just purchased a house and hoping to move on within few months, good riddance to renting with those horrid estate agents in outer London area), a real rip off and the estate agents are horrid creatures, do nothing only rob her.