Since the 27th May 2015, a new law came into effect under the Consumer Rights Act requiring all lettings agents in England and Wales to clearly display their fees in bricks and mortar stores and websites ensuring they aren't just buried in the small print. The goal is to make it clear to both landlords and tenants what exactly it is they are being charged for and to avoid any hidden costs. A list of some of the more erroneous charges from big name companies include:
- Setup fees in addition to normal fees if the property is successfully rented or not
- Additional property visits to attend specific request such as neighbour disputes
- Submission of non-resident landlords receipts to HMRC if required
- Copies of any statement of accounts
- Arrange fees for works over certain amounts upwards of 12% of the total cost of the job
- Charges for arranging more than one quote
- Charging a hidden percentage on reoccurring invoices (contractor commission) for things like gas safety certificates
For tenants, extra costs on top of taking a property may include:
- Accompanied check in fees which includes the cost of an inventory and taking meter readings
- Amendment fees to documentation
- Renewal fees (in addition to the landlord being charged)
- Check out fees - to negotiate the repayment of the security deposit
- Providing references to future landlords
In addition, Agents are expected to prominently display whether they are a member of a Client Money Protection scheme, and to state which redress scheme they belong to should any issues arise. The purpose of a redress scheme is to deal with complaints made by tenants or landlords about agents. This became mandatory from the 1st October 2014 for any letting and managing agents to be a part of an ombudsman.
The Client Money Protection (CMP) Scheme is a compensation scheme which provides compensation to landlords, tenants and other clients should an agent misappropriate their rent, deposit or other client funds. While this isn't mandatory, choosing an agent that does have this protection in place clearly is of significant benefit.
Failure for agents not to comply with these two pieces of legislation could face a fine of £5000.
Another area of confusion that the law wanted to address was that of VAT. From a marketing perspective, its more attractive to have a lower fee and tack on '+ VAT' after than to include the total price. A management for of 10% + VAT looks more attractive that 12% inc VAT, despite the two being identical in value. Therefore the law made in necessary for all quote fees must be displayed as inclusive of VAT.
So what was the effect of these new laws? An article published by Property Industry Eye in June 2015 suggest the industry’s compliance appears very low. Despite the law saying that the “list of fees must be comprehensive and clearly defined; there is no scope for surcharges of hidden fees. Ill-defined terms such as administration costs must not be used. All costs must include tax.” Despite the very clear wording of the law, Eye has been sent lists of both national and local agents who are flouting it, either in whole or in part.
Michael Day, of industry consultancy firm Integra, said:
“I think it would be harder to find examples of compliance than non-compliance, “I have no statistics, but I doubt if 5% of the industry has yet fully complied.”
When choosing an agent, there's lots to consider with price being just one, all be it important aspect. But with the law recently changing in favour of consumers, shouldn't comparing pricing be easy?
We think so.