Letting Agents

Debate between Steve Reed and Sarah Champion

Wednesday 27th February 2013 Westminster Hall

[Sarah Champion (Rotherham) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Brooke.

I requested this debate because of my concern about the growing problems faced by tenants and landlords across the country at the hands of unregulated letting agents. I am concerned that the Government appear to be making no moves to address those problems. We need a regulated sector for the protection of all. I make it clear that I am criticising not all letting agents but a minority who bring the profession into disrepute.

My parents have been in private rented accommodation with the same landlord for the past 30 years. They receive an excellent service, pay a fair rent and have clarity on their position. Increasingly, however, that is not the case for all. I find more and more constituents are being exploited by unscrupulous agents.

With the economy flatlining, we are facing the biggest housing crisis in a generation. The Government’s housing and economic policies are making that worse. House building is down; homelessness and rough sleeping are up. We have a market in which people struggle to get mortgages, and, unfortunately, most of us cannot rely on the bank of mum and dad.

A result of the growing housing crisis is that more and more people are locked out of home ownership and are forced to live in the private rented sector. I have no objection to that per se. In most of Europe, the private rented sector is the norm, but tenants over there do not suffer at the hands of cowboy letting agents, which is the big difference.

In the UK, the private rented sector is now bigger than the social sector. Last year, the private rented sector overtook the social sector for the first time in nearly half a century. Five million people, however, are on local authority waiting lists, and young people are now forced to wait well into their 30s before they can buy their own home, if they can ever afford to do so.

The Government should be building more homes and better supporting tenants and families. The gap between supply and demand is ever increasing. The private rented sector clearly has an important role to play in meeting housing needs, but to do so it must be a market that works for tenants and landlords, with no room for rogue letting agents and rip-off fees.

There are now 3.6 million households in the private rented sector, and a third of those families have children. Private renting is not just for young professionals. The Resolution Foundation predicts that by 2025, if the economy remains weak, 27% of low to middle-income families will be living in private rented accommodation. That is why I urge the Government to act now to impose regulations, because the problem is not going away; it is growing.

What are the issues of private renting? Many of those looking to find a home in the private rented sector, or who already live in the private rented sector, have to use a letting agent. The evidence shows that too many tenants are being ripped off by opportunist letting agents who fail to protect tenants’ money and who charge exorbitant fees that are completely opaque.

A report by Citizens Advice found that 73% of tenants are dissatisfied with the service provided by their letting agent, with a significant number having difficulty contacting their agent and suffering serious delays in getting repairs. There are cases of agencies, even large and well established businesses, running into difficulties because they have no client money protection, with the money of both landlords and tenants being lost. Shockingly, that has not prevented the owners of companies that have gone bust from resuming their activities at a later date.

Ryan Lee, a 24-year-old Cheltenham letting agent, has today been sentenced after pleading guilty to taking £13,500 from 13 customers. Husband and wife Chris and Lucy Mallows were among Lee’s victims. They handed him £900, which they believed would go into a secure deposit scheme. They also discovered that money they had given to Lee to pay their first month’s rent had not reached their landlady. At the time, Lucy and Chris were setting up their own oven-cleaning business, and they could not afford to lose the cash. When they first realised they had been conned and went to the letting agent’s office to investigate, they found the shop stripped of computers and in complete darkness. Lee spent 10 months on the run overseas before being caught. Responding to the case another local agent said:

“There have been incidents recently, all local and reported in the press, of three letting agents disappearing with thousands of pounds of clients’ money.”

Unfortunately that is not only a Cheltenham issue but a national issue.

Individuals who are trying to invest for their future represent the biggest increase in landlords in recent years. That novice group are easy pickings for rogue letting agents. Novice landlords have expressed the pressure that letting agents put on them to raise rents. Shelter finds that one in four landlords has raised their rents because a letting agent had told them to do so. Letting agents put pressure on landlords to issue very short contracts, which benefit only the letting agent as they can charge more fees for re-letting the property.

Letting agents are preventing tenants from directly contacting their landlords. There are no safeguards to protect tenants, landlords or reputable agents. All I request is that the Government create a level playing field in which tenants are treated fairly and landlords have fair competition. Currently, good landlords are being exploited and good letting agents are being undercut by rogues, which cannot be allowed to continue.

More than 4,000 managing and letting agents are estimated to be entirely unregulated. At present, it is still possible to set up a letting or management agency with no qualifications whatsoever. There is no need to conform to requirements of conduct or to provide mandatory safeguards for the consumer. There are no obligations on letting agents, unlike estate agents, to register with a redress scheme enabling awards to be made against agents for quantifiable financial loss to clients. Letting agents, unlike estate agents, operate outside of any legislation. As the Royal Institution of Chartered Surveyors puts it, letting agents operate in the property market’s “Wild West.”

A local agent commented in the Bristol Post:

“It’s all well and good to seek out an agent who belongs to a voluntary licensing scheme, but the average man in the street would reasonably expect consumer protection from any operator in our industry.”

He is right. People do not start their property search by looking for which letting agents have the most kitemarks; they search online for a property in a certain area that is within their budget. Once a desirable property is found, it is difficult to walk away, and I am certain the letting agent’s track record is not even considered.

Voluntary schemes have obvious drawbacks. The good agents comply with such schemes, and the cowboys ignore them. In 2002, the previous Government established the national approved letting scheme as an independent voluntary regulatory body. Industry-led bodies such as the Association of Residential Letting Agents and the Royal Institution of Chartered Surveyors have done good work in encouraging a responsible regulatory approach. Although the principles are laudable, however, at no time have the majority of letting agents in England been members of such schemes. Self-regulation has not delivered and we now need something stronger.

[Steve Reed (Croydon North) (Lab)]

Does my hon. Friend agree that it was wrong of the Conservatives on London councils to scupper plans for a pan-London registration scheme for landlords and agents so that tenants could have had assurance that they met minimum standards?

[Sarah Champion]

My hon. Friend makes a good point, and I completely agree.

Across the industry, there is a problem with rip-off and opaque fees charged by letting and management agencies. A national survey of letting agents found that 94% impose additional charges on tenants on top of the tenancy bond, rent or rent in advance. The citizens advice bureau in Dorset reported a client who was considering renting a three-bedroom property. He was shocked to find hidden in the tenancy agreement a requirement for him to pay £94 every six months for “search fees.”

The national survey also found huge variations in the size of such charges. Charges for checking references ranged from £10 to £275, and charges for renewing a tenancy ranged from £12 to £220. In some cases, additional charges for a tenancy amounted to more than £600, which is a vast amount of additional money for anyone to find. The fact the fees vary so much shows that those charging the premium are clearly making a huge profit.