Letting Agent Fees and Deposits: Private Rented Sector

Alex Chalk Excerpts

Tuesday 3rd May 2016 Commons Chamber

[Maria Caulfield (Lewes) (Con)]

Thank you, Mr Speaker, for allowing me the opportunity to secure this debate. Tonight, I want to highlight the emerging scandal of letting agent fees. Those are fees charged by letting agents when a tenant takes on a new tenancy, on top of any deposit that needs to be paid to secure a property and in addition to the monthly rent that needs to be paid in advance. In London and the south-east, letting agent fees have rocketed over the last two years as competition for rental properties has grown. Not only has the amount charged by letting agents increased, but there has been an increase in the types of fees charged.

There seems to be a particular problem in London, where competition in the private rented sector is fiercest, but the problem is also now affecting many parts of the south-east, including my own constituency of Lewes. My constituency is only 58.2 miles from London and, despite the poor rail service, which has been the subject of previous Adjournment debates, is still very commutable. After being priced out of the London housing market, many people move to the south coast, so competition for rental properties has soared in my constituency during the past 18 months, and letting agents have put up their fees accordingly.

At this point, I should declare that I am a patron of a local housing charity, Homelink, in Lewes. It provides financial assistance to people struggling to secure a deposit for a home to rent. Homelink has seen a significant increase in local letting agent fees during the past 18 months. As a result, it is having to provide local families with financial support for the fees, as well as help for the deposit. In 2015, Homelink provided over £101,000 in financial assistance to local people to help them to secure a home. Despite that, Homelink has seen key workers, those on a low income and young people priced out of the local property market not because they could not afford the rent, but because they could not afford the fees and the deposit required up front.

To investigate the extent of the problem of lettings agent fees, my local citizens advice bureaux in Seaford and Lewes researched those fees across the constituency. They found that the fees can range from £175 to £922. Such fees are in addition to the average six-week rent deposit required—it is rapidly becoming an eight-week rent deposit—and the month’s rent needed in advance. Using the rent calculator provided by the charity Shelter, which is available on its website, a new tenant wanting to rent a two-bedroom property in Lewes, where the average rent is £1,200 a month, would need to stump up in advance anything from £3,032 to £3,779, depending on the lettings fees charged. Realistically, how many of us could afford that?

The research from the citizens advice bureaux goes further, and makes fascinating reading. They have found that not only do fees vary from £175 to just under £1,000, but that such variations can be found by letting agents on the same high street, with the big national letting agents tending to charge the most, while the small independent agents charge the least. Moreover, the type of fees that a letting agent charges varies greatly. Letting agents often charge a holding fee of about £200 to secure a property.

[Alex Chalk (Cheltenham) (Con)]

Does my hon. Friend agree that part of the problem is not just the size of the charges, which can be great, but the lack of transparency? They are often levied on the basis of a pretext that is completely unclear and completely unjustified.

[Maria Caulfield]

I completely agree. I will come on to that specific point in a moment.

The holding fee of about £200 does not always secure a property and is not always refundable. A credit check can amount to about £100. All letting agents charge for drawing up a tenancy agreement, but some charge more for other tenants on the agreement. One tenant who takes out a tenancy agreement may be charged up to £350, but a second tenant may be charged up to £450. Reference checks cost roughly £100, and admin costs usually amount to another £100 to cover phone calls and postage. Some letting agents are making a new charge for an express move. Someone wanting to move into a property within three days will have to pay an extra £100, while to do so within five days costs £50. Letting agents even charge people if they have a pet—this is separate from what the landlord requires—and often charge them £200 to bring a pet with them. If one of the young people in a group who are sharing a property moves out, the person who takes over the sharing arrangement can be charged £300 just to change the name of the sharer in the agreement.