Letting Agent Fees and Deposits: Private Rented Sector

Kevin Hollinrake Excerpts

Tuesday 3rd May 2016 Commons Chamber

[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.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. My hon. Friend is quite right to raise this subject. There is clearly not a free market for tenants, who follow property rather than choose between letting agents because of fees, so it is an issue that we need to address. However, letting agents rely on these fees for income, and so that income would have to come from somewhere else; it could be added to rent or else come from higher fees for landlords. Agents may also choose to take the most secure tenants and prefer those with good credit histories, rather than take a risk on a tenant with an inferior credit history, because of the risk of having to do the work twice, which would add to their costs. There is a potential issue there, so should we consider a cap rather than abolition?

[Maria Caulfield]

I completely agree. That will be one of the recommendations I make to the Minister.

Research by the National Union of Students mirrored that undertaken by my local citizens advice bureaux. The NUS surveyed 3,000 students and found that, on average, students pay £887 in fees, going up to more than £1,000 if they rent from an agent online. That shows that the situation in my constituency is being replicated across the country.

There is still one more injustice that tenants have to endure on top—the six-month tenancy regime. Very often, tenants want a longer lease and landlords are happy to give them one. But it is in the letting agent’s interests to keep tenants on a rotating six-month tenancy, because every time that tenancy is renewed the agent charges another £150 to £350. It is a classic opportunity to fleece tenants once again. The renewal of the same lease for the same tenants for the same property just costs the tenants more money. In law, a tenant should be able to ask for a longer lease from their landlord, but letting agents often ensure that that message is not passed on, and so every six months tenants have to pay fees to agents for little more than a new piece of paper.

To go back to the point raised by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), landlords are often none the wiser about the charges that their tenants face. In fact, landlords often pay no fees at all, because they benefit from letting agents who are keen to encourage them to put their properties on their books rather than those of another letting agent. The charges are therefore passed on to the tenant.

What do letting agents actually do to justify their fees? They do a great deal of work. A let-only deal will involve the letting agent assessing a property for rent, submitting the advert, carrying out viewings, doing tenant reference and credit checks, ensuring that tenants have contents insurance, providing tenancy agreements, setting up payments and informing utility companies of any changes. However, does that work really justify charging tenants just under £1,000?