Letting Agent Fees and Deposits: Private Rented Sector

Robert Jenrick Excerpts

Tuesday 3rd May 2016 Commons Chamber

[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?

[Robert Jenrick (Newark) (Con)]

My hon. Friend is making some very important points. Does she appreciate, however, that estate agents are making around 40% of their income from lettings fees, so if we abolish or cap them, those costs will only be passed on to the tenant in a different way, principally through higher rents from the landlord? There are perhaps two answers. She has already alighted on one, which is to try to encourage—not mandate, but encourage—longer tenancies. Secondly, this House should be much more cautious in future about increasing the regulatory burden on landlords, so that letting agents do not have so many items to check off before they can get tenants into properties; I am thinking, for example, of the right to rent changes brought in recently, which put extra costs and burdens on landlords and letting agents.

[Maria Caulfield]

I thank my hon. Friend for his points. I am sure he will hear some of those suggestions in my recommendations.

The Government have done a tremendous amount to protect tenants and restrict over-exuberant letting agents. Last year, they made it illegal for agents to charge potential tenants to register with them or to charge for providing lists of properties. The Government also changed the law so that agents have to advertise their fees publicly in advance, both online and in their offices; non-compliance is enforceable by local trading standards officers, with a maximum fine of £5,000.

That change is very welcome, but in reality the law is not being followed. Again, my enthusiastic bunch of volunteers at the citizens advice bureaux did a form of mystery shopping locally. They visited 10 letting agents in Lewes and 15 in the town of Seaford. Of those 25, only one had its fees easily and publicly displayed. In practice, then, tenants are none the wiser that there is such a difference in fees between letting agents in the same town.

I therefore have five asks of the Government to ensure further protection for those who find themselves part of generation rent—very often those who cannot afford to buy a property or get a mortgage. First, we should indeed cap letting agent fees, because there can be no justification for the difference in the fees currently charged. Secondly, we should set standards for what can and cannot be charged for. For example, is it right that tenants are charged a holding fee that does not actually hold the property they want and that is not refundable? Thirdly, we should end the practice of charging for tenancy renewal, or at least give greater protection to tenants on short-term lets.