With the housing crisis continuing to grow competition between tenants to secure a rental property is higher than ever pushing rents up. Letting Agents are keen to cash in on this demand and can find themselves being criticised for the fees they charge to both Tenants and Landlords.
Following the commencement of the Consumer Rights Act 2015 letting agents are now obliged to publicise their fees. Any letting agent which fails to comply with this may be fined up to £5,000. It is hoped that this new obligation will make it easier for Landlords and Tenants to compare charges as well as avoiding hidden costs. In addition, by being transparent about the charges applied it should prevent letting agents double charging, i.e. charging the landlord and the tenant for the same work. A report published by Citizens Advice earlier this year stated the average overall charge paid by a tenant was £337 (excluding deposits and reference checks), but some agents charged as much as £700.
On top of that at the end of the fixed term of the Assured Shorthold Tenancies, most of which will only be for a fixed term of 6 or 12 months letting agents are likely to charge a renewal fee, the average cost of which is nearly £100. This is despite the fact that there is no legal requirement for a tenancy to be renewed as it can continue as a periodic tenancy in any event.
It should also be remembered that these are fees that the letting agent is charging the tenant is in addition to what they receive from the landlord, which is most likely to be a percentage of rent. However, despite this standing cost letting agents also apply additional charges when whenever they are required to do something relating to the property. For example when arranging a subcontractor to carry out works some letting agents will apply an additional charge to the subcontractors fee.
We will have to wait and see whether these new rules will have an impact on the rental market. Landlords will decide which letting agent to appoint to manage their property, but with an ever increasing demand for rental properties and tenants primarily making a decision on which property to rent rather than which letting agent to use it is unlikely to have a major impact on the fees applied. After all the new obligations only require letting agents to be up front about their fees, it does not restrict them in in any way.