There has been a lot of debate in the press and both Houses of Parliament recently about the subject of letting agents’ fees; whether these are fair and reasonable says Simon Gerrard, MD of estate agency Martyn Gerrard, writing for CityAM. “Unfortunately as far as I am concerned, they are neither”.

Gerrard says it is common practice in the industry to ask tenants to pay “exorbitant administration charges”, plus a whole “host of other overheads”, a practice which Mr Gerrard thinks is “inherently wrong”, given that landlords are also paying the agent’s a fee. Are the high street letting agents essentially charging both parties for doing the same thing asks Mr Gerrard? He feels that many of the charges landed on tenants are actually part of the agent’s duties to the landlord, and are paid for by the landlord in any case.

The reality of the market, says Mr Gerrard, is that competition in a “chaotic market place” drives some agents into reducing the landlord’s commission at the expense of tenant’s. They load up tenants with “unjustified fees” and, in some cases, also charge the landlord “spurious administrative charges”.

Mr Gerrard cites the charging of spurious admin fees, which are commonly up to £500, just to prepare a Tenancy Agreement, which is, in his view, simply “draconian”. It’s a “practice designed to hoodwink landlords” making them think they are getting a better deal than they actually are.

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Mr Gerrard does not condemn all charges or all agents in this regard. He cites the instances of using holding deposits as a reasonable tool to gain commitment on both sides: “The landlord is assured the prospective tenant is serious and the tenant is certain the property is withdrawn from the market while references are taken”. Of course, the holding deposit is not a fee as such, as when the agreement is signed it is credited to the damage deposit of the first month’s rent.

Screening and referencing tenants is a task that landlords expect the agent to carry out with due diligence, and checking ID and Right-to-Rent under the immigration legislation is now a legal requirement. Mr Gerrard thinks that a £100 charge is not unreasonable for this.

Producing a thoroughly prepared check-in inventory is another legitimate expense and landlords should expect a charge for this thinks Mr Gerrard. But charging tenants for the ingoing inventory is not reasonable, though they can expect to be charged for the outgoing check-out inventory, since they are responsible for the condition of the property when they leave.

Mr Gerrard thinks that in a market where tenants have little choice in which properties and agents they accept and use, it is not realistic to expect them to “shop around” to find the most reasonable fees.

All additional fees that a tenant can expect to incur “should be presented upfront in a transparent manner”. Mr Gerrard thinks that unless agents get their act together and start “working together to bring these unjustified charges under control”, then politicians will do it for them.

From 1st October 2014 it became mandatory for all lettings agents and property managers to join a government-approved redress scheme which must be clearly displayed on websites and stationery. There are currently three approved schemes: The Property Ombudsman, The Property Redress Scheme and Ombudsman Services: Property. Mandatory redress allows both tenants and landlords in dealings with letting agents the opportunity to complain to an independent body about the service they have received. Any letting agent that has not joined one of the three redress schemes could be fined up to £5,000.

Agents must disclose details of all fees, charges or penalties which are payable to the agent by a landlord or tenant in connection with an assured tenancy. The requirement is for agents to compile a comprehensive list of everything that a landlord or a tenant would be asked to pay at any time before, during or after a tenancy. The guidelines stress that there is no scope for ‘surcharges’ or ‘hidden fees’.

Now, following campaigning, mandatory Client Money Protection (CMP) schemes will be required under the Housing and Planning Act 2016 of every letting agent, similar to the requirement to be in a redress scheme. But as is becoming the practice with most legislation these days, much of the Housing and Planning Act allows the Secretary of State to introduce more related regulations and bring them into force as required, rather than spelling them out in the Act itself.

It is therefore likely in the future the CMP schemes to protect landlords’ deposits and rents will be provided as government approved ones, similar to the deposit protection ones, run by selected insurance companies and the agencies professional bodies themselves, under similar provisions as some of these bodies provide already.

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