Lettings agents braced for a big clampdown
Sat 19 Apr 2014
Lettings agents braced for a big clampdown
Both landlords and tenants will get extra protection from rouge operators, says Teresa Hunter.
Rows with lettings agents over exorbitant charges, withheld deposits, and failure to carry out instructions, are soaring as the numbers squeezed out of home ownership by rising property prices continues to grow.
The Property Ombudsman, saw 22% rise in complaints from tenants last year, from 8,334 to 10,179. Yet the ombudsman was powerless to help 34% of those who appealed because the letting agent was not a member of the disciplinary scheme.
The government revealed on Tuesday that from later this year, all agents will have to join a complaints and compensation service that will protect landlords. The new regime may be operating by October.
Letting agents are unregulated, leaving both tenants and landlords exposed. About half the complaints are from landlords who have suffered at the hands of rogue agents.
Complaints from tenants
These are mainly about charges and refusal to return deposits, while landlords arehit by failures to carry out instructions and problems with guarantors.
Tenants can face a barrage of charges by agents, such as a tenancy admin fee, as high as 420 at Foxtons, Belvoir, another letting agent, charges 200 for the first tenancy application and 100 for each further one. Foxtons charges 54 for any letter it has to send about late rental payments.
Each tenant must pay a fee forreferences to be checked. At John D Wood this is 75 per tenant on top of, typically, six weeks' rent as a deposit. Reference checks on guarantors can cost 150 or more each.
If the individuals sharing a property alter, a change ofoccupancy fee will be levied, which at Foxtons is 310. If a tenant wants to renew at the end of the agreement, a fee of about 100 can be expected.
Tenant David Keenan, 40, of Greenwich, southeast London,was angry when his agent, One Stop Estates, told him he would have to pay 100 on renewal or vacate the premises. He appealed to the landlord, who overruled the agent. Keenan said: "I didn't see why I had to pay another 100 just to stay whereI am. I don't believeI had been made aware of this fee at the outset."
When a tenant leaves there will be an inventory check fee. Marsh & Parsons charges 130 and Foxtons 150.
Foxtons says on its website that the tenant is liable to cover the cost of any missed inventory check appointments.Missing one nearly cost Lindsey White and her flatmate 2,500 after the agent refused to refund their deposit. White, 36, now of Datchet near Windsor, said "We were renting alovely garden flat in Putney, southwest London. I arranged an appointment to have the inventory checked, but whenI got there, they had beenand gone. The agents then bombarded us with all sorts of penalty charges, claiming the flat was in poor condition, when we'd had professional cleaners in." White, furious, complained to Foxtons, which returned some of the money, but she and flatmate were still about 1,500 out of pocket.
She said: "I didn't realise there was anyone I could complain to. I was very busy and didnt have the time time to look into that."
Many complaints to the ombudsman involve a refusal to return up-front fees when a tenant changes their mind about a property because on closer inspection it does not meet the description, references have failed, or circumstances have changed. If the change of heart occurs within a few days, the Property Ombudsman, Christopher Hamer, usually sides with the tenant.
In one case, prospective tenants paid a 280 holding desposit but changed their minds the same day. The agent refused to return it.
The ombudsman's code of practice entitles agents to "make reasonable deductions from holding deposits to cover appropriate expenses", but Hamer felt this agent's stance was excessive. He ordered it to refund 180, accepting that some costs had been incurred. "I did not consider the sum of 280 to be reasonable given they withdrew within 24 hours," Hamer said.
"Most complaintsI see are a case of 'brain out of gear', misunderstanding, lack of communication or incompetence. But we cannot have agents operating to their own set of standards. There is 20bn in annual rents at stake, and that is substantial amount of money."
However, Ian Potter of the Association of Residential Letting Agents belives that many problems are caused by a lack of understanding and experience of those involved in the rental market.
He said: "Often tenants do not understand the way the market works and expect things that are not reasonable. At the other end, landlords go into business with little understanding of what is involved."
Landlords also get protection
The booming buy-to-let market now represents 14% of households - about3m homes - according to the latestgovernment statistics.
A report out next week, commissioned by Paragon Mortgages, will show that buy-to-let returns have outstripped all big asset classes in the past 18 years, attracting long-term savers and those lookingfor income.
Landlords' complaints are often about the conduct of financial checks, resulting in a loss of income. Also, agents can fail to produce tenants they have promised are about to come on the books.
In one case, an agent let a property to a serial frauster who cost the landlord 6,700 in lost rent. Not only did their payments bounce, but the fraudster sublet the property illegally to earn an income. The ombudsman instructed the agent to refund the 6,700 rent, plus 1,000 on top, in recognition of the poor service it had provided.
How compensationschemes work
Membership of the two existing ombunsman's arrangements - the Property Ombudsman and ombudsman Services - is currently voluntary, with the reuslt that about 40% of the industry, or some 3,000 letting agents, is not signed up to either scheme.
From October, agents will have to sign up with one of these two or with a third, the Property Redress Scheme, which is yet to be set up.
Housing minister Kris Hopkins said: " All tenants and leaseholders have a right to fair and transparent treatment from their letting agent. Most are happy with the service they receive, but a small minority are ripping off people and giving the whole industry a bad name."
Membership of the scheme requires agent to have complaints procedures underpinned by the ombudsman, and agree to pay up to 25,000 compensation. They must hold professional indemnity insurance to guarantee the sum.
They will have to adhere to a code of conduct covering transparency of all charges and rents, deposits, tenancy agreements, and the management of inventories. A model tenancy agreement will be introduced, which landlords and tenants can use for longer-term tenancies to provide greater stability.