Putting a cap on exploitative agency fees - Maria Caulfield MP

The poor, the young, the self-employed, and anyone else excluded from the elusive housing ladder, will tell you all about the scourge of letting agencies.

Rising house prices are pushing more people into the private rented sector, and as competition intensifies, letting agencies are hiking up their fees, just because they can.

For Maria Caulfield, MP for Lewes, the arbitrarily high fees charged by letting agents in the South East have become ‘unsafe,’ and are forcing some of the poorest people out of town and into debt.

From her research, agency fees can vary from a minimum of £150 up to as much as £800, just to secure a property. An increasing number are charging these fees again six months later, simply to renew the existing contract. Some are starting to charge tenants a non-refundable fee just for viewings, or even to enter into a bidding war with other tenants.

“This seems to be an industry of making money out of tenants. There’s such a disparity between the lowest and the highest fees, there doesn’t seem to be any rationale for why these charges are so high,” she said.

“Letting agents know that people are desperate to secure somewhere, so they take advantage of that. If you’re going to see three or four properties, that could mean money-down on each of them just to get a viewing. That feels very unsafe to me.”

Also rising in line with competition, is the size of the deposit required. What used to be a standard one month in advance only a couple of years ago, then crept up to six weeks, and as “competition keeps hotting up” agencies are often now asking for two full months.

Many people in Caulfield’s constituency were having to move many miles away from their home town, not because of rising rents, but due to the rising and recurring agency fees, on top of unfeasible deposits. Yet losing customers is not enough to encourage a reduction in fees, as plenty more will opt to borrow the money.

“They know there’s huge competition: if you turn it down, someone else will snap it up the that day or the next. Letting agents have been able to come up with all sorts of schemes - and tenants feel compelled to play by their own rules, or else they won’t get the property they need or they want.”

Asides from the undisputed shortage of housing in the UK, part of the problem is the rising number of part-time landlords.

According to the London School of Economics, the size of the private rental sector has more than doubled in the last 15 years and now accounts for almost one-fifth of all dwellings in the UK, while “the bulk of landlords are private individuals, many owning just one unit.”

The LSE claims that both Right-to-Buy and Buy-to-Let policies introduced in the late 1990’s have seen a boom in the number of one-property landlords who, unlike professional landlords that tend to manage their properties themselves, are more likely to outsource the letting process to an agent. And with lower margins, they’re also more likely to be attracted to an agency which doesn’t charge them any fees. According to Caulfield they often have no idea their tenants are being charged so much.

“I don’t think it’s something these landlords ask,” said Caulfield. “But talking to some of them they say they’re very often attracted to a letting agency who says they don’t have to pay anything. But that is often because the tenant is paying the fee instead.”

Recent changes to Buy-to-Let will relieve some of the pressure, and the Government is confident it can build its way out of the supply problem. Caulfield however wants to see modest and plausible regulation in the meantime, that would put an end to such predatory behaviour

“That’s why I’m having the debate on Tuesday, to see if there is a code of conduct or some legislation we could bring in.

“My main thing would be looking at capping agency fees, so that tenants are aware of what they should be paying. And you should not be having to pay that agent’s fee again, just for renewing your lease.

“I’d also like to see a code of conduct, similar to the rules landlords have to follow, and to see regulation around the length of the tenancy. Six months works for some people, for others that want a longer tenancy, six months is just an excuse for letting agents to introduce another fee, and often review the rents and put them up. So I think there does need to be some work around that.”

Caulfield is leading an adjournment debate on the topic late on Tuesday evening.

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