New report calls on government to regulate all letting agents

Tenants are being ripped off by cowboy agents in the ‘exploding’ rental market, says a major new report out today.

It is urgently calling on the Government to regulate letting agents to the same standards as estate agents.

The Resolution Foundation, an independent think tank which focuses on lower income groups, says tenants are having to pay significant upfront costs, whilst agents’ fees are variable and there is a lack of transparency around charges.

The organisation carried out a mystery shopping exercise of 25 unnamed letting agents in three cities – London, Cheltenham and Manchester. It found the range and type of fees charged varied enormously.

For example, administrative fees ranged from £95 to £375. Total upfront costs (including deposit, admin fees and rent in advance) for a one-bed property in London were £2,166, around double those charged in Manchester (£1,028) and Gloucester (£1,094).

Just two of the letting agents displayed the costs of renting on their websites and many renters only discovered charges after they had decided to rent a property.

Average deposits for a one-bed property ranged from £487 in Manchester to £1,099 in London.

Many tenants reported difficulties when moving within the private rented sector as they had to hand over a new deposit before they had got their old one back.

Resolution says its findings are particularly relevant given the growing number of households forced into renting for the long term. In 1988 only 14% of low to middle income households aged under 35 were living in rented accommodation, but by 2008 it had tripled to 41%.

The report points out that unlike estate agents, letting agents are unregulated and under no compulsion to hold membership of an ombudsman service.

The Resolution Foundation is calling for:

•  Letting agents to be regulated to the same level as estate agents, so that unscrupulous agents can be banned;

•  All agents to be signed up to an ombudsman service giving redress to tenants;

•  The ombudsmen’s codes of practice to stipulate that agents must display all charges to tenants and landlords on their website and in adverts in a way that is easily comparable across agents;

•  The Government to consider ways to make it easier for tenants to transfer deposits between landlords when they re-tender for the tenancy deposit protection schemes in 2012.

Vidhya Alakeson, Resolution’s director of research, said: “The lack of regulation in the exploding private rented market is of growing concern.

“We need more transparency so tenants at least know what fees they’re facing and to help create a more competitive market. Given that an increasing number of families have no option other than to rent long term, we need to question why letting agents are not regulated to the same degree as estate agents.”

Christopher Hamer, The Property Ombudsman, said: “This report emphasises the growing importance of the lettings sector for people seeking a home to live in.

“The Government does not see regulation of the sector as a priority and I, therefore, welcome the recommendation of this report that all letting agents should be required to be registered with an ombudsman scheme so that, at least, landlords or tenants can gain redress where they have been disadvantaged by an agent.

“Providing clarity and transparency of fees is also very important. As more and more people become tenants or landlords, these measures would assist them in fully understanding the commitments they are taking on and enable them to challenge the agent if anything is unclear.”