More regulation for letting agents is required

I’ve had strong thoughts on this for a while now, for years my letting agency has always refunded fees to tenants who don’t get accepted for tenancies whilst our competitors have always kept them.

They have potentially made 100s or 1000s each time they let a property. This is unethical in my opinion and needed regulating. The authority is finally doing something about it but what they’re doing is naive and ill thought out.

The government plan – They’re introducing a ban on agent fees to tenants from (around) April 2019. They have decided to stop agents charging any fees to a person aspiring to rent from them or currently renting from them. This includes Admin fees, tenancy renewal fees, property cleaning fees, deposit insuring fees etc etc.

The government reason – This has been forced through quickly as a vote winner and blamed on agents charging extortionate fees to prospective tenants thus making renting in the private sector extremely volatile and expensive which in some cases is true.

Why I think their plans are ignorant – The government claims that agents are employed by landlords not tenants and therefore any costs should be covered from the landlord – in which other private industry do the government tell companies who they can and can’t charge for their services? This is setting a dangerous precedence for professional services as a whole.

The market dictates what people pay for services and who pays it. Mortgage brokers and similar services charge the customer for their time referencing and applying for loans from banks and building societies. These fees are not capped or regulated in this way. Why is it a different set of rules for one industry to another?

In order to maintain their customer services levels agents will be forced to pass on this loss to their landlord client base. Some may say this is fine because landlords can afford it. The truth is that not all landlords are flush with cash and this may force them in to self managing. This is where the biggest issue comes in – accountability.

Once a landlord self manages they are much more difficult to trace, so is rent money collected and the landlord is less likely to be as up to date with safety regulation within their property. Agents are the professional face of an otherwise HUGE faceless industry.

My idea –  I’ve been an agent all of my working life and in this time ive seem many cases where, as a professional agency we have helped both tenants and landlords to resolve situation which otherwise could have turned extremely sour. So what should be done..

  1. There should be a requirement for letting agents to be licensed by a regulatory body ensuring their staff and directors are educated on the laws of renting property, ARLA membership for example.
  2. Agents admin fees to tenants when they apply for a property should be capped to something in line with the rental value of the property. In more expensive areas of the country there is a requirement to charge more for the same service do to higher business running costs and staff wages. My suggestion would be the equivalent to one weeks rent could be charged for referencing a tenant. If they are subsequently declined their money should be refunded. Agents should not be incentivised to accept applicants for properties which they know will not be accepted before the referencing even commences.
  3. Fees for contract renewals should be outlined pre tenancy and should be paid jointly by landlord and tenant as both parties have mutual benefit from the agreement.
  4. Agents should be required to have a high street presence ensuring tenants can always contact them between certain hours and even walk in if they need to.
  5. Agents should have an audited client account, this is already a requirement of ARLA and NALS membership.
  6. Agents should have CMP (Client money protection insurance) another requirement of ARLA and NALS membership.

Agents definitely provide a worthwhile service and its important to keep agents on the high street and keep a face on the private rented sector.

I’m keen to open a debate on this and if you have any thoughts or experiences to share it would be good to hear from you. Email hello@spencerwood.co.uk.