Tenant Admin Fees Guide for Tenants

Estate Agents fees need to be transparent

Letting Agents Need to Ensure Their Tenant Admin Fees are Transparent

Tenant Admin Fees are a Fair Way to Do Business

Housing Charity Shelter would like to see letting agents fees outlawed in England and Wales having already persuaded the Scottish Parliament to scrap tenants’ fees. We want to explain why this could be a bad thing for tenants.

The job of a letting agent is quite time-consuming and, as we know, time is money. It is expensive to rent property to tenants. There are many costs involved in setting up tenancies, and obviously the majority of these costs are borne by the landlord. However there are costs that link directly to a tenant including references, legal documents, and the time spent with tenants finding just the right property for them. All of these are legitimate reasons that the tenant should bear some of the costs of renting property, and are often charged as tenant admin fees, but perhaps the most relevant one is to ensure that the tenant is fully committed to the process.

Where a tenant does not pay any fees but decides to take a rental property the landlord often suspends marketing the property while the agent takes out references. (Even where marketing continues the agent is accruing costs by keeping that property on the market in terms of advertising and conducting viewings). There is nothing holding that tenant to the property and so in the meantime he finds another property that suits him just a bit better and so off he goes leaving the first landlord and agent high and dry.

Rising Costs Mean Rising Rents

Who should bear the costs of referencing the tenant, and any other legal and administrative work that has been undertaken by the agent? If it is the landlord then he will put his rent up, if it is the agent he will put his fees up, then landlord will then put the rent up.

With no fees charged to them the tenant could switch properties several times before committing himself, with no financial penalty at all. Most landlords will have experienced this problem even where the tenant has had to lose a couple of hundred pounds to move on to another property, so imagine how much worse this will get if there is no financial commitment on his part.

There is a myth that all landlords are rich, that all agents are rolling in money, and that all tenants are honourable people who are taken advantage of by sharks.

Most people are reasonably honest and respectable, and I include landlords, agents and tenants in this generalisation, but of course there is a measure of self-interest driving all of us, so if there is no concrete commitment in place there will be more timewasters costing the industry money, and so overall prices will rise, and this will mean that rents will rise.

In our opinion the only way to deal fairly with this situation is for agents to charge a reasonable fee for the work they do; to be open and transparent with their fees; and for everyone to keep to their side of the bargain.

Guide for tenants

  • Ask your Letting Agent what fees they charge before you view a property.
  • When you have found a property, ask for a written break-down of how much you will pay for the specific property you want to rent.
  • Check if the Agents charge for renewals, check out fees, and any other miscellaneous fees.
  • Make it clear to the Letting Agent that you will not pay for any charges that they do not detail in this initial exchange.
  • Ask for confirmation from the Agent, in writing, of all monies that you will be expected to pay including the rent up front and deposit so you are absolutely clear in your own mind what you will need to pay for.
  • Don’t commit to renting a property unless you intend to move into it.

It will be interesting to see how the Scottish system works out over a period of time, and whether in fact tenants are any better off due to this change in legislation north of the border.

If you want to find out more about becoming a tenant, and avoiding tenancy pitfalls check out the Top 10 things tenants should know, when renting a property on DIY Doctor’s project pages.

You can read more about Protecting yourself from Rogue Agents if you are thinking of renting a property.

Court Ruling is Good News for landlords and tenants

Landlords of rental properties to let can feel secure in taking rent in advance

Court ruling allows landlords to feel secure about letting to overseas tenants

The latest ruling in the case of Johnson vs Old clarifies the distinction between rent paid in advance and security Deposits held in case of loss or damage to the property.

You will probably have been aware of the ongoing case between Johnson and Old, which questioned whether money taken in advance for rent was in fact a Deposit in the eyes of the law – and as such should be protected by the landlord in an approved scheme.

For those not in the know, in this case the tenant could not prove a reliable credit history before letting the property. So she was asked to pay the first 6 months in advance. After renewing a couple of times (paying six months rent in advance each time)  the tenancy finally became a periodic tenancy, and the tenant simply paid each month in advance. Later the tenant fell into arrears and when the landlord served a Section 21 notice the tenant argued that it was invalid, because the initial 6 months rent paid in advance was a ‘deposit‘, and so it should have been protected. In the initial case the judge agreed with the tenant and ruled that it was a deposit. As it had not been protected the landlord would then have to return the whole 6 months rent and may have been liable for an amount up to three times that initial amount.

This is good news for everyone involved in letting, the landlord, agent and the tenant all benefit from the decision of the court of appeal.

Paying six months rent in advance where tenants who do not fit into strict financial guidelines is common practice in the industry. It allows them to secure property if there are credit issues; where tenants are coming in from abroad; or have just started work etc. to be able to rent a property when they don’t tick all the boxes in terms of financial references. This money is never meant as a tenant’s deposit it is simply to ensure rent is paid during the fixed term of the contract, where it is harder for a landlord to accelerate a Notice for Possession through the courts if it is necessary because of non-payment of rent.

If landlords felt that this was not a secure and simple option for them they would be unlikely to rent property to tenants in this position, which would be bad for the rental sector, as one of the reasons people are renting is because they have financial irregularities or they are in a job which moves them around the globe regularly. This would reduce the market for Landlords and their agents to be able to let to, and it would reduce the stock of properties available to tenants.

We can now all get back to the business of renting property

We recognise the need to secure tenants deposits at the beginning of the tenancy, and to disburse them appropriately and transparently at the end of the tenancy, and we always ensure this is done at Riley Marshall. We welcome this sensible ruling on a cynical suit, brought by a tenant who could not meet her financial commitments, and so turned on her landlord to shift the blame.

If you want to find out more about deposits and the procedures for protecting them please go to our blog ‘How secure is your deposit?’. We are always happy to answer questions about the letting process, renting property, deposits or references. We rent and sell property around South West London. So if you are a landlord or a prospective tenant please call us on 020 7394 1160.

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Lettings Market remains self-governing – so tenants should know how to protect themselves from rogue agents

Wordle: LETTING AGENT

The government have decided not to regulate the Letting market despite concerns over unscrupulous landlords and agents

A government paper released yesterday confirms the current government will not impose regulation on the Lettings industry. There is currently no legal requirement for letting agents to belong to a trade association, although many letting and managing agents do submit to voluntary regulation.

Estate agents who deal with property sales do have to comply with basic levels of regulation, including registration with the Office of Fair Trading and having access to an Ombudsman scheme for dissatisfied customers. It was thought that the Government would impose similar regulations on the letting market this year.

In response to this news, there was a report on unfair letting agents fees this morning, on the BBC Radio 4 Today Program. Ian Potter, from ARLA (the Association of Residential Letting Agencies). ARLA was asked to comment on the decision. They have been instrumental in lobbying successive governments for more regulation of letting agents.

“We want regulation of the letting agents market. It is the cowboys who get the bad reputation for the sector. There are many agents around the country who are doing things properly and who do not charge these extortionate fees.” Ian Potter – ARLA

The previous Government had proposed full and mandatory regulation of private sector letting and managing agents. However the current Government claims it is mindful of not imposing too much ‘red tape’ on the industry. This seems plausible while so many have to rent, because it is increasingly difficult for first-time buyers to get on the property ladder.

In August last year the Scottish Government decided to ban agents from charging any fees to tenants. However the problem is that fees are related to genuine costs incurred by the agents, which then have to be passed to the landlord. The effect has been a national increase in rents of some 6% since the law was introduced. To our mind it seems better to be transparent and upfront about costs rather than to load everything onto rents.

What can you do as a tenant?

If the market is going to be self-regulating then it relies on tenants being well-informed about industry practices.So as a tenant, or prospective tenant, you need to know what to look for when you are shopping around.

Avoiding unfair fees

  1. Do not agree to pay a fee for registering or to be taken on a viewing
  2. Ask for a full break-down of fees in writing before agreeing a tenancy
  3. Ask what is included in the fees and if there are any ‘extra’ fees that could be added later, typical charges include:
  • Referencing
  • Credit check
  • Tenancy Agreement
  • Inventory
  • Check in fees
  • Renewal fees if you stay
  • Check out fees if you leave

Points to Remember

  1. Not all agents will charge these fees, or if they do they may include elements in a one off fee rather than broken down individually. What you are trying to ascertain is the total charges so you can compare like-with-like.
  2. It is illegal for an agent to charge you fees for registering with them, or viewing properties.
  3. The amount of money required for a deposit varies, and must be held in trust throughout the tenancy in a government approved scheme. Ask about the amount payable, when and how it needs to be paid, and how it will be returned.
  4. You may be asked to pay a ‘holding deposit’ while the agent or landlord takes up your references. This is usually deducted from the first month rent when you move into the property, but may be non-refundable if you do not to go ahead with the tenancy. You should check exactly what the terms are before you pay.
  5. It is worth bearing in mind that the agent is acting on behalf of the landlord, not the tenants. The agent has a duty of care to their tenants in the same way as the landlord does if he is not using an agent, but the agent should always be acting in the landlord’s interests, and on their instructions.
  6. Even if you really like the property you should not proceed with a let if you are sure the landlord or agent are not reliable.

Here at Riley Marshall we always treat our tenants with respect, taking their wishes into consideration where possible, and we communicate with them and our landlord clients in a timely and courteous manner. We furnish tenants with the details of everything they will need to provide to comply with regulation, with the landlord wishes and with our professional practices, including any fees that they will incur. This has to be the fairest way to do business. If the tenant then wants to shop around they are free to do so.

We believe in acting in an open and honest way for good business reasons as well as ethical ones. It makes good financial sense to keep everyone advised of what the charges are to avoid misunderstanding or losing a deal later in the relationship.

We are mindful (like most agents) keep our fees within a competitive range in the knowledge that landlords and tenants are looking for value for money, not necessarily just the cheapest deal, but the best deal for them. As we all know you get what you pay for and if your agent slashes his fees well below the norm within the industry then there is a reason for that and it is likely to be inexperience over true cost, or a willingness to cut corners in a way that will be detrimental to Tenants and Landlords.

If you are looking for property to rent be assured that we are members of The Property Ombudsman (TPO) for your protection . Please do visit our main Riley Marshall website to search for property and you can contact us if you have any questions.