Beware rogue letting agents
Rising house prices and the widening gap between earnings and the amount needed for a deposit, along with tighter lending criteria for mortgages, have forced a growing number of people to rent long-term rather than buy their homes.
Nearly two thirds of 20 to 45-year-olds don't believe they have any chance of getting onto the property ladder, according to Halifax, which now claims Britain is becoming a "nation of renters".
However, the lack of regulation governing the lettings industry means many people are falling victim to rogue agents. Last year there were 1,338 official complaints to the Property Ombudsman about estate and letting agents - the highest number since it was established 20 years ago.
Unlike estate agents, letting agents aren't required by law to register with one of the official regulatory bodies - the Association of Residential Lettings Agents (ARLA), the Property Ombudsman or the National Approved Letting Scheme - so the more unscrupulous ones can get away with charging extortionate fees and providing an inadequate or downright shoddy service.
Ian Potter, spokesperson for ARLA, says the fact that anyone can set up as a letting agent without having to meet any legal requirements places both landlords and tenants at financial risk. The threat posed by unregistered agents is on the increase as the market expands.
But even registered agents are able to charge whatever they like, and in areas where housing is in short supply, especially in inner-city neighbourhoods, tenants have no option but to pay these inflated fees.
Kate Insall, 36, from Warwick, a marketing manager and co-founder of nearlynewforbaby.co.uk, had a disastrous experience with a Warwickshire letting agent a few years ago.
In 2007, she moved out of her rented house, having cleaned it thoroughly before she left. Shortly afterwards she received a letter from the agency demanding she pay a huge whack for a cleaner the agency had deemed necessary to employ to professionally clean the property after she had vacated.
"I offered to go back and clean it again, even though I knew it was in a perfect state, but it wouldn't let me into the house," explains Kate. "We had even bought expensive new curtains; the agent wouldn't return them and charged us for taking down the old mouldy ones."
The agent then took almost £200 from the deposit, and Kate says there was nothing she could do because it wasn't registered. "The way we were treated still infuriates me."
Taken for a ride
But it's not just tenants who are suffering at the hands of the letting agents. Many landlords are also being taken for a ride.
Chantal Cooke, 42, managing director of a radio station, briefly let out the flat she owned in Kent through a local agent. After a few months, however, the agent offered her tenant a new flat with another of its landlords, without letting her know.
When she asked the agent where the rent was, it denied all knowledge and claimed not to know where the tenant had gone. It then refused to give her the tenant's address or to help her collect the outstanding rent and the deposit.
"I can only assume the other landlord was paying a higher fee, or the agent was simply so incompetent it had no idea what it was doing, and having mucked up, was not professional enough to admit it. Or it was too scared, as it knew it had behaved unethically - and possibly even illegally," she says.
Stories of rogue letting agents are plentiful, and even those registered with one of the professional organisations may still behave unethically. Carly Collins, 27, for example, used a registered letting agent to rent out her one-bed flat in Milton Keynes.
However, she says she found it a complete waste of money. "The agents were useless and were either not around or unable to fix things to a high enough standard. I was paying the agency £80 a month but it did very little for that," she adds.
Most agencies charge a fee for drawing up a contract and conducting credit and reference checks. They can also charge each tenant to draw up an inventory and check them in and out of the flat.
James Campbell, head of property services at Winchester White Estate Agents, says there is a huge disparity in charges among agents, and admits that some letting agencies "use administration fees simply to line their pockets, with very little to show for it".
At Winchester White there's a standard charge of £250 (plus VAT) for each household (no matter how many tenants there are). Campbell explains that all the paperwork is outsourced, so he says it would be unacceptable to charge each tenant this fee as it doesn't cost the agency any extra time or money.
Such scruples are rare, though, as letting agents set their own administration fees. Some can charge individual tenants up to a week-and-a-half's rent for this.
"When the going is good in the industry, the big companies hold all the cards. There's more room to hide in a big company, and you'll always get agents who try and get around the system," Campbell adds.
How to keep safe
But there are ways you can safeguard yourself against malpractice.
Always choose an agency that's registered with an official body, and remember that any good agent will outline every cost you'll be expected to pay, including any charges that will arise later in the tenancy.
When you pay your security deposit, make sure this goes into an approved deposit protection scheme (DPS) such the Deposit Protection Service (depositprotection.com) or MyDeposits (mydeposits.co.uk). The DPS is a government-authorised scheme, set up in 2007, to safeguard deposits; it is open to all private landlords and letting agents.
By law, your letting agent should arrange this, but in practice the onus is on you to make sure it fulfils its obligations.
You'll receive an email from the scheme confirming receipt of the money around a month later. Your deposit will then be kept safely in a separate account, ensuring you get it back at the end of the tenancy. Any problems that may arise will be dealt with by a neutral third party.
Issues often surface when the money is not placed in such a scheme: it took Duncan McIntosh, 25, a scriptwriter from London, eight months to get back from his letting agent the deposit he had paid on a shared house, after he and his housemates failed to check on what had happened to their cash. A stream of letters and emails back and forth between the agent and the landlord followed over the course of several months.
"It was all really stressful, especially as I felt powerless to do anything," says Duncan. "In the end, my parents had to threaten the letting agent with court proceedings before the agency finally coughed up the money."
ARLA's Ian Potter says: "The government claims there's no reason to introduce regulation, but at the moment letting agents can set whatever fees they like without fear of recrimination. I would advise any potential tenant or landlord to only use an agent registered with us or the ombudsman (or both); otherwise they'll have to turn to a civil court to deal with any problems."
This warning is echoed by the Property Ombudsman, Christopher Hamer, who called for more control over letting agents in his 2010 annual report: "There are about 100 pieces of legislation relating to landlord and tenant matters, but none relating to agent activity."
Sadly, the government apparently has no plans for any new laws to increase protection against rogue agents, so whether you're a landlord or a tenant, you should make sure you stick with a reputable business. In this game, it's a case of 'buyer beware'.
What the law says
Currently, there's no compulsion for letting agents to join one of the official self-regulatory schemes. However, an agency that is registered with one of the main industry bodies will have to abide by a code of practice; if it is found guilty of acting against the code, it may lose its membership.
The Property Ombudsman has the power to require member agents to pay compensation of up to £25,000 in any one case if it is found to be in the wrong.
There's no charge if you wish to search for property through an agency, but always check it's registered before you sign up to anything. If it isn't, you'll have to go through the civil courts if you come up against a problem.
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