British letting agents accused of ‘double-dipping’

http://www.theguardian.com/money/2014/aug/21/uk-letting-agents-accused-double-dipping

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How much does it cost to change a few figures on the date in a rental contract? Landlords are being charged as much as £670 – then tenants are asked to pay as well – amid widespread “double dipping” by unscrupulous letting agents, according to research by Direct Line for Business.

It reveals an industry with capricious charges, where both landlords and tenants are ripped off. According to the research, while some agents charge £65 to complete an inventory, others charge £300. The cost of a visit to check on a property can range from £20 to £100, while those for managing a checkout – when tenants leave a rental property – range from £30 to £125.

Direct Line also found that landlords may be charged for the cost of running credit checks on prospective tenants, when these tenants have also been charged, often £50 or more.

It said: “While most letting agents play by the rules, the research found evidence of both landlords and tenants being charged for services such as checking references or alterations to contract extension agreements, even when revisions to the contract amounted to just a change of a date.”

Profits at letting agents have boomed over the past decade as individuals and families unable to afford high house prices have been forced to rent instead, and buy-to-let landlords have hired agents to manage their properties. While on average landlords are charged 11% of the rent if they use a letting agent, the research found a range from as low as 5% to a high of 17%.

“Taking into account agents’ fees, taxes and unbudgeted costs such as emergency property repairs, landlords can easily pay out expenses of 25% of their annual rental income for a property,” Direct Line said.

Mystery shopping conducted by housing charity Shelter in 2013 at 58 letting agencies across the country found that all charged renters fees to set up a tenancy, on top of deposits and rent in advance, with the average fees almost £350, and some agents charging more than £700.

In Scotland, it has been illegal to charge fees to rents since 1984, but the law was widely flouted until a legal clarification in November 2012. Shelter says research carried out by a Scottish letting agency, Retties, showed that banning fees to tenants did not have any significant adverse effect on the business of letting agencies or landlords, or the rents charged to tenants.

Shelter is now asking England’s 9 million renters to sign its petition to ban letting agency fees in England. It says: “Letting agencies can charge renters sky-high fees on top of what landlords already pay them. As demand for renting has grown, so too have the fees being charged by letting agencies. It’s time renters got a fairer deal and for politicians to know they need to act.”

Figures from website Spareroom.co.uk on Thursday showed that since 2009, UK rents have risen by 10% while tenants’ accommodation budgets have fallen by 0.5% as wages continue to rise more slowly than inflation. It said the average monthly rent for a room in the UK (not an entire flat) has risen from £500 to £550 since 2009, with a high of £633 in London and a low of £290 in Northern Ireland.

But rental indices are notoriously unreliable in comparison with house price indices. Separate figures from LSL Property Services, which owns the UK’s largest lettings agent network, suggest that rents have tracked inflation since 2010, with the average property let for £753 in August, the same level as November 2013.