"Rip-off" tenancy fees - Fight back!

Lord_Baltimore

Some disappointing responses imho. Although the OP might have been expressed a little differently, I broadly agree that letting agents, like estate agents, overvalue their service and worth. These agencies are staffed with those whose only qualification is greed.

I hope services like purple bricks really take off for this very reason.

As has been said, letting agents and estate agents operate within the terms of the market but making a profit should be different to making a killing.

In the meantime OP, don't get mad, get even. It's about time these people were made to earn the ridiculous sums they charge.

Students could make their lives hell .

Notoconsumerapathy

booksurr wrote: »

whilst one can hardly knock you for supporting a campaign for change, me thinks you doth protest too much - stating that is it fraudulent just because you do not like the level of fees charged is ridiculous ...

I quite agree with you that stating something is fraudulent just because one doesn’t like the level of fees charged is quite clearly ridiculous.

That is not what I have said and certainly not what I meant.

I am well versed in the particulars of “fraud” and do choose my words carefully. One particular tenancy fee in my opinion could be potentially fraudulent when coupled with the conversation the individual has had with the estate agent regarding the charge. Certainly, dishonesty is present in my case as the reasoning for the charge explained and the practice I have since discovered do not match. Misrepresentations were made dishonestly but in doing so, are they trying to obtain an advantage they are otherwise not entitled to make it fraudulent?! That would be a grey area indeed although one argument would be to suggest that the fee itself could not stand up to scrutiny without the “dishonest misrepresentation” made in the first place.

I can assure you that a letting agent in a legal and commercial sense is most certainly NOT independent of the Landlord. They are paid a fee to manage the property on behalf of the Landlord and are accordingly the Landlord’s agent. That is the reason for their existence. They are not impartial middlemen regardless of where the property will be managed or not. I do not know what has ever led you to believe the estate agent is independent of the landlord.

I do not have a lack of understanding of monopoly markets, I am challenging the very monopoly market itself.

I do not “moan” about the unfairness of my experience. Certainly, unfairness is what promotes change on every consumer issue, that and safety. Those are the two fundamentals. I am trying to do something constructive however (see my other posts) not merely “moaning” in a forum and being apathetic. It is good to stimulate the debate on an issue that affects 11 million consumers in this country.

I appreciate the feedback on my language used to convey the complaint and certainly hope my response has cleared the matter up regarding “fraud”.

Notoconsumerapathy

His_Dudeness wrote: »

Do not take that the wrong way, but you seem to indeed lack knowledge on economics, the private rented sector, and politics...QUOTE]

To boil the issue down to asking someone if they want to pay less with a backdrop of the money going to fat cats is to my mind to miss the point entirely. Furthermore, change has already begun and has come down from Government. There is an issue identified and action has started. Do these people to lack knowledge on economics, the private rented sector, and politics?


See my comments on the restaurant analogy, that may assist you in understanding where I am coming from.

My argument and focus comes from weeks of careful effort and research on the tenancy fees I have been charged (5 in total). Through my own investigations and talking with reputable small estate agents I have discovered this sorry state of affairs. No assumptions are being asserted here. Furthermore, I work both in finance and the service industry. Our business model would not stand for such behaviour.




I agree with you that small estate agents can be most beneficial. These past 11 years I have always been able to rent through such firms with great success but then again most of those properties were not managed by the estate agent. Fees were nominal circa £100.

thesaint

So you are against "rip-off" fees, but are campaigning to ban all fees?

princeofpounds

Many times I have made this comment on the boards, and I will do it again.


The lettings market is problematic from a free market perspective because it is illiquid and heterogeneous.


Two posh words that basically mean that people don't transact very often, and the 'products' on offer are very different - if you need and can afford a 3 bed, you can't typically substitute a 2 or 4 bed. A combination of work, family and schools can limit search criteria to a fairly narrow range of options.


In practice, this means that in the couple of weeks a tenant is desperately looking for a house, there is often just a small handful of possible properties and often they can all be listed at the same agent.


Markets with these characteristics are especially vulnerable to oligopolistic (i.e. rip-off) tendencies, even when commerce is fairly free to a casual observer.


Combine that with the classic agency problem, where an agent exploits their market position for their own interest above that of their principal (the LL), and you end up with the situation we have where fees are almost suspiciously high.


Understanding this economic basis to the problem is utterly key to doing anything about it. Unfortunately very few housing ministers from the last couple of decades seem to grasp some basic economics - labour often sees only statist solutions, whilst the conservatives think the free market can solve the problem.


Personally, I am a capitalist, but anyone who actually understands capitalism properly knows that markets in certain structures can 'fail' to produce rational pricing.


I don't have great silver bullet solution to this to be honest. But I would suggest the following things could be useful.


- Start with transparency, which is the foundation of any functioning market and should not be controversial. All agents should be required to publish, like a pub does, a public and prominent list of their fees to both LL and T. Then at least both sides understand before they expend any effort what the agent is taking out of the whole transaction (too many LLs forget that fees for the tenant basically come out of the accommodation budget.


- Overcome the illiquidity problem by introducing more flexibility when tenancies end. If a LL asks a tenant to leave, the T should have the possibility of leaving within a window, rather than having to get as close to the end of the tenancy as possible to avoid double-payments.


- Statutory periodic tenancy law should possibly be reformed, to allow LL and T alike to renew fixed tenancies (rather than just extend on a rolling basis) without reprinting and incurring poor value agency fees. I admit I haven't thought of the details of this, just an idea that occurred to me writing this.


- Actually allowing people to build houses would be a help, diluting the oligopolistic power by increasing supply. I think it is somewhat exploitative to prevent people who are perfectly capable of buying land and buying bricks, and putting the two together, from doing so in a reasonable way by punitive planning permission - it effectively forces them to pay a tithe to the property-owning class.

Gonzo1987

Notoconsumerapathy wrote: »

Hi all

I am new to this forum but recently experienced for the first time myself the "rip-off" tenancy fees some estate agents charge and felt that the Consumer Rights Act's transparency clause did nothing to assist me all because the estate agent told be about the fee upfront. Total fees for me, not including tenancy renewal fees are circa £900 – the cost of a mortgage product.

It's not exactly as if you can shop around and use another estate agent for the same property. If you like the property then you are stuck with the estate agent. Crucially, I have privately investigated and discovered that the difference between the true cost of the service being purchased / offered and the actual fee charged to the consumer by the estate agent is considerable and in my opinion completely unethical and unjustified. Surely estate agents earn their profit from the Landlord?

Not all estate agents are like this but certainly all the major players seem to be. There is virtually no competition and the tenant is treated as a cash cow.

I would certainly urge anyone interested to sign SHELTER's campaign to end letting fees (broken the link below as a new user I cannot include links)
http:// england.shelter.org.uk/campaigns/fixing_private_renting/letting_agencies/sign_our_petition


Does anyone have any thoughts or experience they would like to share?

Cheers

If tenant fee's are banned then rents will increase because the agent's will have to charge the landlord more, who will in turn, pass this onto the tenant.

I agree certain agents seem to charge a lot, but some, (like us) don't charge extortionate fees, but, fee's aren't at the forefront of a tenant's mind when looking for somewhere to live. We're not a charity, we have to do a lot of work on the tenant's behalf, not just the landlord to create a tenancy, so why shouldn't we charge for that service?

Fee's should be regulated, not banned.

His_Dudeness

princeofpounds wrote: »

Overcome the illiquidity problem by introducing more flexibility when tenancies end. If a LL asks a tenant to leave, the T should have the possibility of leaving within a window, rather than having to get as close to the end of the tenancy as possible to avoid double-payments.

I don't see that this is an issue and that that would solve anything.

princeofpounds wrote: »

Statutory periodic tenancy law should possibly be reformed, to allow LL and T alike to renew fixed tenancies (rather than just extend on a rolling basis) without reprinting and incurring poor value agency fees.

This has nothing to do with tenancy law. This is about the contract between a landlord and his agent, which the landlord is free to negotiate.

princeofpounds wrote: »

Actually allowing people to build houses would be a help, diluting the oligopolistic power by increasing supply.

The letting market is not oligopolistic.
You might argue that in a given area the letting agency market is oligopolistic but then so would be many industries.

Again the crux of the issue is housing demand outstripping supply in some area, so in that sense building more would indeed solve many issues.

Dan-Dan

Gonzo1987 wrote: »

If tenant fee's are banned then rents will increase because the agent's will have to charge the landlord more, who will in turn, pass this onto the tenant.

I agree certain agents seem to charge a lot, but some, (like us) don't charge extortionate fees, but, fee's aren't at the forefront of a tenant's mind when looking for somewhere to live. We're not a charity, we have to do a lot of work on the tenant's behalf, not just the landlord to create a tenancy, so why shouldn't we charge for that service?

Fee's should be regulated, not banned.

Too late...

Notoconsumerapathy

thesaint wrote: »

So you are against "rip-off" fees, but are campaigning to ban all fees?

I am not trying to ban them entirely, have a read of my later posts. The current campaign by Shelter is to ban them entirely as in Scotland. However, if the choice is ban or maintain the current state of affairs then I would vote ban.

HouseBuyer77

If tenant fee's are banned then rents will increase because the agent's will have to charge the landlord more, who will in turn, pass this onto the tenant.

So there's a fundamental difference between tenants and LLs here. As princeofpounds says your average tenant has a few short weeks to choose between a few potential properties, this doesn't give them much ability to choose/negotiate fees and they probably won't have a property from every available local agent to choose from

An LL on the other hand when looking for an agent can compare the fees and choose whichever one suits.

So agencies don't need to compete on fees currently because tenants don't have much power to choose between them.

Were LLs responsible for all fees however they would have far more incentive to compete on them.

So yes fees would be passed on via rents but I suspect the fees would be lower (potentially far lower) as there's now a mechanism for competion to drive the price down that previously didn't exist (or barely existed anyway).