Letting agents and tenants’ groups clash over tenants’ fees

Letting agents and tenants’ representatives clashed, with agents vehemently defending their right to charge fees.

EYE joined agents, Generation Rent, Renters Rights and ombudsman representatives at L’Escargot in London’s Greek Street for a round table debate hosted by property software company VTUK to hear arguments from both sides of the lettings fence. The debate was chaired by EYE’s managing director, Nick Salmon.

While agents insisted their fees were minimal, and the existence of fees kept them afloat as businesses, Generation Rent and Renters Rights said tenants should not be charged any fees at all.

The debate saw a number of topics discussed, including questions on how agents justify their fees to tenants and landlords, what would happen to rents if agents were unable to charge fees to tenants, and is there sufficient transparency over the fees that agents charge.

Rosie Walker from Renters Rights (London) agreed there was now far more transparency over fees, but said tenants were still getting a raw deal and should not be paying fees at all.

She said: “I get emails from people who say ‘my son is at school and we are settled but the agent has asked for another £500 for renewal or admin charge’.

“This is not like buying a luxurious item: people need a home and they need it next week and that’s all they think of.”

But Matilda Macpherson from Knight Frank hit back, saying: “I don’t think the fees are an issue and I also don’t think we have seen anyone disappear just because the fees are now on our website.

“We live in a world where people have an iPhone 6 but will pay another £200 or £300 for an iPhone 7, so people pay. If you want something, you pay for it.”

Mark Rowe, managing director of Rowe Property Services, an independent letting agent in Hampshire, argued that a free market allowed tenants a choice, but he was also passionate about agents having to charge fees, just like any other business charges for its services.

Addressing Rosie Walker, he said: “We are dealing with people’s biggest assets and emotions run high when you move, so anything that goes wrong, we are prime targets for it. (But) we are businesses and we need to make a profit and if you drill down into it the profit margins are not as great as some people think.

“We are a business, you have an option but we have to make money. I am not forcing the money out of you. If you want to go for one of my properties, that is what I charge. If you want something from someone, you pay for it. Surely we are not in a generation now where things are free of charge? I know you say your tenants shouldn’t be charged at all, but if we are doing the work, then we should be paid.”

The round table also discussed the possibility of self-regulation in the industry. Rosie Walker told agents their image was “being let down by the worst agents” and she encouraged agents to report agents who were not displaying fees or who were clearly breaking the law.

However Mark Rowe said he was busy enough already, without thinking about what other agents were doing. He said: “I have never reported an agent for not displaying their fees.

“I haven’t not done it because I think they should just carry on doing it. Of course I don’t agree with it, but it doesn’t mean I should have to spend my time grassing them up.”

But he added that the prospect of self-regulation could also lead to spiteful game-playing between agents. He said: “Unfortunately in the industry we are in it’s quite cat and dog. If it was self-policed and all we needed to do was to make a phone call it could go a bit crazy.”

Also on the menu was the question of what would happen if tenants were not charged fees. While tenants’ representatives argued that landlords, as business people, could afford to pay slightly more in fees, agents said the money would simply be clawed back through rent payment.

Dan Wilson Craw, from Generation Rent, said: “If you had £200 or £300 the tenant no longer had to pay then I think the vast majority of landlords could afford that. If the rent is then put up the tenant could chose to move somewhere else in the area. We think seeing property as a place to make your money is wrong.”

In an invitation to Generation Rent and Renters Rights to spend a day at his agents to see why he believes fees are justified, Mark Rowe said: “I would love to see either of you spend a day in a letting agents. The demands we are under are massive. If the landlords are being charged that additional money (from having to pay the fees themselves) then they will 100% claw it back from the rent.”

But Rosie Walker argued that even if rents did go up, at least tenants would know how much they had to pay, rather than being hit with sudden fees. She said: “Tenants shoulder a lot of the risks because it’s them that lose their homes if things go wrong.”

She said that if landlords transferred the fees to rent, “the tenants would be paying the same, but it would be called rent. It’s better for the tenants to know exactly how much they need to pay each month”.

Dan Wilson Craw also suggested the idea of a comparison website, where all fees in any local area could be displayed, giving tenants easier choice.

He said: “We have transparency of fees by law but we would love to see a comparison so that tenants can choose.”

Agents also said they had never knowingly lost tenants due to the fees they charged.

Matilda Macpherson said: “Our fees are very transparent on the website, so no”, while Virginia Skilbeck, from Douglas and Gordon, a sales and lettings agent in west and south-west London, said: “If we lose them we don’t know we have lost them because they have made the decision by looking at the fees on the website.”

Peter Grant, managing director of VTUK, said recent research by his company showed that based on a letting agency branch that had 50 landlords and 75 managed properties, the average fee profit margin was just £159 per tenancy.

But Rosie Walker caused a storm by adding: “Letting agents have always been a disaster in my experience. I have had letting agents that have effectively charged protection money. Once, I moved (into a property), paid all the fees, and they said there was this extra fee. They said it was a few hundred pounds to make sure the deposit was OK, but I said I have a right to have my deposit protected. I probably wouldn’t see the advantage of using an agent again.”

One thing is for sure, the debate on agents fees will rumble on.

The round table was filmed by TV crew Fuser TV.

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9 Comments

  1. MF

    Shelter and the like only ever seem to quote the most extreme examples (i.e. £500 to renew a tenancy agreement).  My stance will never change: cap fees, don’t ban them.

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  2. GlennAckroyd

    No tenant application fees, no renewal fees from us. Shelter never quote us as an example. Maybe Shelter’s exec’s should work for free and donate more money to homeless people?

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  3. StatementOfFact

    Unless I am breaking the law, which I am not, I will charge what I bloody like, and if you want to moan about it then take a hike.

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    1. mat109

      Exactly the problem. So a change of the law is in order then…

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  4. smile please

    Sounds like Mark did well keeping his cool.

    Just reading some of those comments made my blood boil.

    Everybody deserves a home and to feel safe and secure in it. But people need to take some responsibilities themselves.

    Look at the costs involved in renting. If it is laid out that there is £500 to renew the tenancy do not sign it if you do not agree with it. vote with your feet. I would also think £500 is the higher end as opposed to the norm.

    Shelter, Generation Rent are going about this all wrong, they sound like little children not understanding how the world works. They must recognise letting agents are businesses.

    What they should be doing is looking to home families that cannot afford to home themselves and look to show greater transparency in fees and educate the tenants not vilify the agents and landlords.

    The big winners in all of this is the government. They have neglected housing close to a generation now and they know pension provisions are not there for the future which is why they are happy the BTL sector is booming especially after the pension reform. More people are looking at property as their retirement plan, very few are young professional landlords. Despite all of this the PRS are made out to be the bad guys while the government stand back and laugh!

     

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    1. mat109

      Do you charge money to the buyer when you sell a house? Why not?

      The situation is the same. The landlord is the client, NOT the tenant. I’ve been told that in no uncertain terms repeatedly when discussing tenancy deposits with agents…

      The argument that all businesses need to make money is fine – they get their money from the landlord. In london and other places under high housing pressure, there really is no other option but to pay or be homeless. If all supermarkets and groceries charged you an “application fee” in a food shortage, you’d be paying it?

      The “free market” argument is wrong in this situation. Landlords choose agents – and if an agent is willing to cut his fee and recharge that to the tenant instead, I’m going to pick that agent over another that won’t. Stuff the tenant, if I always know I’m going to find one.

      Tenants choose houses, not agents.

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      1. Beano

        Then your argument is with the landlord, not the agent.

        The landlord has decided that he would mostly rather not pay a living wage to have an agent spend hours of their time; preparing inventories, carrying out check outs and check ins, prepare contracts and other compliance documents, show potential tenants round houses at the drop of a hat, deal with all manor of issues in preparing a property for let…. and of course pay silly money to overcharging monopolistic websites to market the house.

        He would rather we save him this expense by charging the tenant (in most cases) the lions share of (some of) these not inconsiderable costs.

        In return he gives the agent the ongoing management fees, which again dont amount to a lot……and to the tenant hopefully he wont need to put his rent up as often or as much.

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      2. smile please

        No we do not charge the buyer.

        BUT the legal documentation is drawn up via a solicitor (letting agents do this for lets)

        Mortgage adviser charge a fee

        Lenders charge a fee

        The buyers have to pay stamp duty.

        Also we get a much larger fee from the seller, and guess what ……. They set their price to cover ALL moving their costs so includes their solicitor fees, their mortgage fees, their lender fees, their stamp duty fees, their estate agent fees so it pushes the price of the property up.

        Also UK is about the only country in the UK not to charge a buyer in most countries the buyer pays a premium of between 1 – 6% to the agent.

        The route you are wanting lettings to go down is private landlords. i think there are far more horror stories involving private landlords than agents. and its easier for them to manipulate the system.

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  5. Gump

    Didn’t we go through all this yesterday?

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