Housing lawyer Tessa Shepperson has called for a total rethink of the way the private rented sector operates.
Shepperson, who supports a ban on letting agent fees charged to landlords, says that the present situation is “grossly unfair” to tenants and should not be allowed to continue.
She said: “Many agents behave honourably, charging modest fees to tenants and providing a proper service to them (albeit often against the interests of their true clients, the landlord).
“However, others appear to be taking advantage of the tenants’ urgent need for accommodation and charging inflated fees not just to tenants but to their landlords too.”
Discussing the rights and wrongs of letting agent fees charged to tenants, Shepperson said that the major issue is a conflict of interest.
“The problem is that if the agents are acting for the landlord, they cannot be acting for the tenant too,” she said.
Shepperson said that home buyers have their interests represented by their own solicitors. There is no equivalent protection for tenants.
She also acknowledges that agents do provide services for tenants, and spend a lot of time doing so.
She said: “The big problem is that if the letting agents are not allowed to help the tenants and put their case to the landlord – who will?
“There is no system in property lettings for separate representation for tenants (as happens when buying a property) – plus it is generally the tenants least able to afford professional help who need it most.
“If letting agents are not allowed to help them, if acting in such a conflict of interest situation were to be made professional misconduct (as it would be for solicitors), then this could be bad for tenants.
“At the recent ARLA conference this issue was raised and it was suggested that tenants should represent themselves. The suggestion raised a huge hollow laugh from the room. Obviously, the negotiations leading up to the signing of a tenancy will be unworkable if agents are not allowed to help tenants.
“How then can this issue be resolved?”
Shepperson said there could be a role for agents to act as an intermediary between tenant and landlord.
Or, she said, there could be scope for a new profession of tenant agents, acting on the tenants’ behalf, and who are paid similar fees to those currently charged to tenants by the landlord’s agent.
Shepperson has called on the forthcoming consultation on the fees ban to raise these issues.
You can see my original post here http://www.landlordlawblog.co.uk/2017/04/03/complicated-questions-issues-concerning-letting-agent-fees-tenants/
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Not sure why this is being downvoted. Tessa is just trying to show us what else she said. It’s not like she’s making us pay to see the full story! Cynical, guys and gals.
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“Or, she said, there could be scope for a new profession of tenant agents, acting on the tenants’ behalf, and who are paid similar fees to those currently charged to tenants by the landlord’s agent.”
Presumably there will be a framework for Letting Agents to charge this new breed of “Tenants Agents” for their legitimate expenses when dealing with such agents?
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This is an interesting concept. So the tenant would have a representative that does all their legal checks and referencing and passes this in to us as their agent, represent tenant at check in and check out, advise them on the TA and basically negotiate their deal in the same way as the Landlords agent does for the Landlord. This is not wholly a bad idea given it would take it back to similar to property sales.
From my perspective as well it might actually mean less arguments over cleaning at the end of tenancies and any other deductions and might mean that Tenants understand their obligations clearer and adhere to them more closely making the job of the Landlords agent somewhat easier overall too.
My only question is this, whose paying for the Tenants representation? If we look at the sales model it should be the Tenant. If so, that would be fair to all parties and might raise the game for some agents and stop so many rogue Landlords. I could see this working.
Agents could have Landlord and Tenant departments giving them scope to deal with the representation of Tenants when renting through other agents to avoid conflicts of interest of course.
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some very interesting points, sales and lettings are two different concepts however;
A sale is on one off transaction with the buyer having no further obligation to the vendor after completion.
Agreeing a let is the start of a long term relationship. If the ‘tenant agent’ is acting for the tenant they will not be impartial and it will not be in their interest to declare referencing issues for ‘difficult to house’ tenants. Leaving the Landlord exposed?
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Sorry Tessa but in my opinion, an overly expensive, unnecessary, ill thought out, hair brained scheme, that would never work.
Cant believe no one has thought of this before, and by all means call me innovative; how about this idea ……………. the government could could just cap what agent’s charge Tenants to ensure they get a fair deal!!
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Agree that it would probably be more expensive than the current system for some tenants. On the tenant fees cap, sadly the horse is bolted and you can easily blame the agents who have been charging way over the odds for that !!
Quite a few agents now who do not charge fees, so it shows it can be done. When i first started in 1996 we never charged tenants. As the estate agents started to join lettings in the early to mid 2000’s, that is when you started to see tenants fees so they could “offer 5% full management”. If you want to blame someone, I would start with them!!
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Glad someone likes my idea of ‘tenants agents’.
Pierce – the cost of dealing with them would be covered by the fees the landlords already pay. After all, agents must deal with the tenants somehow – represented or unrepresented. Dealing with represented tenants could actually save them time.
The main point of my article is that if agents are dealing with both landlords and tenants in an unregulated system there is room for abuse. As is plainly happening in some cases.
Capping tenants fees would be unfair on agents as the fee would soon become devalued due to inflation.
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Tessa, why would a Landlord pay for a tenants rep who ultimately is out to get a better deal for their client – the tenant?
When a house purchase takes place the vendor doesn’t pay for the legal reps of the purchaser.
Whilist I don’t disagree with your thoughts of a tenants rep in principal, I do disagree that it would be fairer, and I’m 100% sure costs to the tenants would go up, as tenants reps start to “clip the ticket” with additional chargable “benefits” as that sector becomes more mature.
The current system isn’t broken.
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I commented above how I see that your idea could work, indeed I can, and I actually do think it could save a lot of people a lot of headaches and go a long way to cleaning up the system, however, as Lettings Guru and Pierce point out (and as I said above), the Tenant would need to pay for this in the same way as a purchaser of a house pays for their conveyancing. Yes, the Tenant would indeed get more support which, in my eyes, would be no bad thing, but as with any service you recieve, they would need to pay accordingly as the Landlord pays for their service.
The Landlord cannot pay for the Tenants service, as pointed out above (and indeed covered in the original article) it is a conflict of interest.
So you would have agents that have different departments, one for Landlords (paying for the service they recieve) and one for Tenants (paying for the service they recieve) and, as with conveyancing, the same agent could not do both (to avoid conflict of interest), but it would make it a fair system where both parties are being appropriately represented and paying for the service as they do when they buy!
Great idea with the above principles in place.
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“in some cases” will always remind me of this from The Onion: http://www.theonion.com/article/fun-toy-banned-because-of-three-stupid-dead-kids-290
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I hear what you say Tessa but our fees to the landlord barely cover our overheads which is why we charge tenants. By using your model, the landlord fees MUST go up to cover the tenants agent? I would like to think that we are fair to all parties and don’t jeapordise either position, but if the landlord is unwilling to pay for tenants agent then we are on a hiding to nothing.
As an example, I am today arranging for a thermostatic shower to be replaced at MY COST as the landlord is refusing to pay for it to be replaced. The difficulty I have is that there are three bathrooms and this one is barely getting warm. The landlord is saying they have two other showers and the tenant, quite rightly, is saying they rented the house with 3!
So to avoid any further dispute I am replacing it free of charge with a new one, how many agents do that? We don’t get a lot of money each month from the management fee for this property (£85) and this little excercise has wiped this out and more for this month!
When the ban comes in I may not be so accommodating as the landlord will be my client?
The industry is on a collission course fuelled by greedy and rogue agents. But the professional and ethical ones that read PIE are now being made to suffer which will widen the gap between agents and tenants.
Earlier this year, I created a system for tenants to be charged a fee that would be capped and put this to the government, as well as using some firm evidence to suggest that rents would go up when the ban comes in but it appears to have fallen on deaf ears.
For the record I am coming out of the industry later this year, we don’t rely of tenants fees like some do but it is getting ridiculous now and I for one have had enough. Sorry for the long reply 🙂
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fair reply pierce….
i have certaintly done a few “freebies” for a landlord to keep both parties happy rather spend hours trying to mediate.
are you retiring, selling, or just had enough of lettings? (or all three lol)
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Thanks Ding Dong, I’ve retrained into another industry (coverted exisitign skills) which is better regulated and has some teeth, so if the customer doesn’t want me to do something for the price I quote I’ll be walking away. And the beauty is, the government are highly unlikely to interfere with the pricing because they have direct control and are desperately short in the sector 😉
If you want to contact me for more info, ping Ros an email and she will send you my contact email if you reference back to this comment. I won’t be trying to sell you anything like courses so don’t worry, i’ll just enlighten you what I’ll be doing.
But to answer your question, the property business will be handled by my other half and I’ll dip in and out when required. 😉
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I had to smile at your reference to keeping people happy through your own pocket, we have all done it, and yes as decent human beings we look to do what is ‘right’ irrespective of who is ‘our client’.
I have plenty of landlords who are unreasonable; I wouldnt act the way they do but this obviously puts me on a potential collision course. I have to manage the expectations of the tenant, whilst reminding the landlord of the responsibilty they have placed on me.
Pierce is a brave man leaving the burden of the business on his other half!
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Why am I brave man? She is just as capable if not more thn capable of taking over, in fact I took it from her 5 years ago?
Yet another example of readers of PIE who like to judge others when they know absolutely NOTHING about them
“I had to smile at your reference to keeping people happy through your own pocket, we have all done it, and yes as decent human beings we look to do what is ‘right’ irrespective of who is ‘our client’.”
Glad I made you smile 🙂
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Mmmm strange response, unable to recognise humour even with the exclamation mark? Or was that a sexist remark; thus could never be humorous?
In the context of my reply I thought it was obvious it was a light hearted quip, basically saying that the hassle and stress of lettings that you highlighted is not a gift most wives/partners would be pleased to recieve….
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I am very, very confused by all this.
We have a Lettings agency. We are not employed to fleece or abuse tenants and we do not charge extortionate fees to tenants. Landlords employ us to rely on our knowledge to meet all legal requirements on their behalf. We are there to ensure all things surrounding the tenancy go as smoothly as possible on all sides.
I think that, as ever, this is simply a case of sufficiently funding bodies to pursue and prosecute horrendous landlords or agents.
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Unfortunately Mark, the over chargers / fleecers are the largest group members of ARLA! Sad, but true.
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Agree on that one James
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Nail on the head James
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A letting agents work for the landlord who hire him.
Tenants are free to hire their own agents, solicitors, or surveyors in the exact same way landlords can, but they will discover that this costs money.
This seems to me to be an attempt to make letting agents middle men, which they already often try to be, because it re-inforce their power and charging opportunities.
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Interesting that some of you quite like the idea of the tenants’ agent – or at least don’t think it’s totally mad. In my article, I was basically just throwing ideas around to see what people made of them. After all, you have to start somewhere!
I’ll have a further think about it and maybe do a discussion post on my Landlord Law blog in due course about this. I’ll flag it up with Ros when I do and she may mention it here.
I’ll try to include any ideas from here, so keep them coming!
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Shepperson said there could be a role for agents to act as an intermediary between tenant and landlord.
Err explain that one to me, isn’t that what you say we shouldn’t be doing but have been all the time? As far as conflict of interest is concerned …. nuts and sounds more like that good old lawyer talk thats got us into the mess with injury claims … or more often false claims on no win no fee basis. It seems to me that you are trying to stop the so called rogue agents fee’s by taring eveyone with the same brush and have no solution to that problem. You have just added higher fees for tenants to use a tenants agent or will they do it for free! There is nothing stopping a tenant from seeking legal advice before signing the tenancy agreement, which is not rocket science and been around for yonks.
As a letting agent I need to know my tenant for one very good reason. I need to protect my landlord from the tennat from hell, just like those on the TV, from lawyers and organisations who take advatnge of the system to house them for free and damages running into £thousands. When you can cure that problem which is the real problem, we won’t need to charge tenants for time worked.
Maybe the articale should be … “How to protect landlord and agents from rogue tenants, lawyers and organisations manipulating the system”.
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Hi Tessa. Firstly, fair play to you for coming on here and fielding questions and criticism. Not many would or do
I, like a lot of my colleagues feel strongly that the fair agents are being punished by the greedy ones. I charge modest fees to the tenant to provide them with a turn key outcome which often takes one of my team upwards of a full days work when all things are considered. Credit check, inventory, viewings, swapping utilities into their name, paperwork, arranging sign up, lodging the deposit etc etc. On a minimum wage example one full day for one member of staff equals 8 hours at 7.50 = £60 (I pay a lot more than this but let’s just use this). Add that to costs of offices, fuel, paper, telephone, credit check, insurance, pension for said staff member, etc then the cost easily goes to above £150. Now, unfortunately I want to make a profit so when I charge a tenant £250 I do make a small profit but that’s business. The reality of my situation is that the above example would more likely cost me around £180-£200 so it’s not a huge mark up, and certainly not one that could be labelled profiteering. Some may say that cost should be Bourne by the landlord but I disagree. Tenants should have to pay for a service that benefits them. The landlord gets charged a monthly fee for looking after the management. It could be argued that the monthly management brnefits the tenants just as much so maybe a monthly charge to the tenant should also be considered. Again, sorry for the long reply but I feel very strongly that a blanket ban would really damage a lot more than it fixes. I would personally have to cut my workforce by 25%. In my opinion capping is the simplest and less damaging way and would wipe out exploitation over night.
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here here
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I thought agents charged landlords a commission in the region of 10-15%. Surely that should cover the costs of dealing with the work on behalf of the landlord.
So far as tenant fees are concerned, the ‘tenant fees’ of 100-700 currently charged by landlords agents to tenants would instead be charged by their own agent (if the tenant’s agent scheme took off). So they would not be paying any more.
I don’t see why this should result in an overall increase to tenants. It could result in less fees if their agents do a good job. As was suggested above there could be separate depts in agents offices to deal with tenant work and agents could refer to each other. So no loss there either probably.
What could possibly go wrong? (Don’t answer that).
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Tessa, as is often the case in our industry the figures are probably somewhat over the reality! Most agents will be lucky to have much (if any) of their business getting more than 10%..
Some areas have new players offering a lot less than 10%. I would say the average out of London/south east agent charges somewhere between £200-300 tops for tenants moving into a single property. I would be embarrassed charging more than £300.
We are probably overcomplicating the issue by introducing another tier with regards Tenants agents, furthermore I just dont see tenants wanting to pay for such a service. There is nowhere else this cost is coming from than them. Also as said above, who would provide them with support/advice beyond checking them in?
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Agreed!
We charge between 8% – 10% all in depending on the property – I would love to charge 15% (I know Tessa is saying this is the upper tier) but simply would not get away with it
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Tessa, as Beano says this is not the case. Again using my own agency as a marker we get no more than 10% because of competition. The average rent charged for us is £540pcm so we get an average of £54 per property per month. We still do everything that everyone else does in the country but becuase of our geographical location it amounts to less per property.
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As was suggested above there could be separate depts in agents offices to deal with tenant work and agents could refer to each other.
What!!!!!! I have no doubt you have good intenetions but you need to get out and work in a busey lettings office for a week and then see the light come on.
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I find it interesting to see agents calling for fees to be capped. If the initial announcement from the chancellor had been a cap, I suspect there would’ve been a big fuss just the same.
I also find it amusing how just about every agent seems to claim that their fees are reasonable and that it’s only those ‘rogue’ agents out there who are ripping off tenants. I guess it is unrealistic to think anyone would hold their hands up and admit to being part of the problem.
Lastly, rental prices will not shoot up after fees are banned. Agents and landlords have already been pushing prices to the limit by trying to get as much as they can out of tenants. If there were an opportunity to increase rental prices – as there has been in the past few years – it would have been taken already, which it has.
What will happen, however, is that a lot of agents will begin to find loopholes and ‘grey areas’ – some legitimate, some not – to charge extra and recover losses.
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There’s a simple answer to this and I won’t write in huge detail because it will send you to sleep.
Actually Enforce the laws and regulations in place and be ruthless to those that break said laws.
cap agent fees
stop taxing landlords so heavily
If a GP breaks the law then The consequences are very very serious. Let’s do the same in the lettings industry.
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