Letting agents hit tenants with ‘reservation’ fees

http://www.theguardian.com/money/2015/may/30/letting-agents-tenants-reservation-fee

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They have been creeping into the residential sales market for some time, so it may come as no surprise they are now hitting the lettings sector: upfront reservation fees that tenants are being asked to pay for their application for a property to be processed.

Guardian Money has been contacted by one couple trying to rent a house in the Midlands, who are furious after being forced to hand over a £250 reservation fee to a local lettings agent Northwood. Thinking this had secured the property subject to the usual checks, they later learned that the agent had also taken a reservation fee from another potential tenant. They were told it would then be up to the landlord to decide who they wanted to rent to.

The couple, who do not want to be named for fear of being blacklisted by the agent, say they found themselves stuck in limbo as a result.

“We’ve been told that we cannot withdraw from our application without losing the £250 fee,” they say. “If we don’t get the house, the £250 will be refunded, but until we know what is happening, we can’t look for another property – unless we pay another reservation fee. In the meantime, we have to move out of our existing house and the date draws ever closer. We won’t get our fee back for five working days, just adding to the problem.”

Northwood, a franchised business that has 87 lettings offices across the country, says on its website: “When you find a property that you like, the agent may ask you to pay a reservation fee in order to process your application. The amount of this payment will form part of the total deposit if your application is successful. This payment is non-refundable should you not wish to progress with the application, but will be returned to you in the event the landlord is unable to proceed.”

Upfront fees are spreading across the estate agency and lettings industry. Earlier this month, Money revealed that some agents were demanding that prospective buyers hand over a £2,000 “deposit” when they made an offer to buy a property if they wanted to be taken seriously.

Brian Cox, which has five branches in the suburbs of west London, had been asking buyers whose offers have been accepted to pay £2,000, in return for which “the property will be removed from the market”.

After the fees were disclosed in the Guardian, the company scrapped the deposit scheme “with immediate effect”. Would-be homebuyer Jessica Rose, who brought the matter to Money’s attention, branded the deposit “greedy and unethical”.

Meanwhile, Northwood’s managing director, Eric Walker, defended its policy of asking tenants for a reservation fee. “All our fees are clearly set out and have been for over two years. We introduced the reservation fee because too many tenants were agreeing to multiple tenancies and then later choosing the one they wanted. It left us having to re-advertise the properties and left landlords with empty properties.”

He says franchisees (agents) are not allowed to take multiple deposits and that he would be reminding them of this. He says the aim is to return deposits as quickly as possible – ideally within five working days and certainly within the 10 days required under the Property Ombudsman’s code of practice.

“If the tenancy proceeds, we don’t get a penny – this amount is deducted from the first month’s rent,” he adds.