The National Union of Students (NUS) has today welcomed a report from the Communities and Local Government (CLG) Select Committee which has set out a series of proposals to correct serious flaws in the private rented housing market.
One of the report’s recommendations, which NUS suggested in its evidence, is to bring the level of regulation for letting agents up to the same level as that for estate agents. The report also proposes that agents be required to publish a full-breakdown of fees in adverts and that they be prevented from charging both tenants and landlords for the same things.
Students, often renting for the first time, can be the victims of unscrupulous letting agents and would be a major beneficiary should the government take the proposals forward.
Among the Select Committee’s recommendations are calls for tenants’ rights and responsibilities to be more widely promoted to them. This is an area where NUS and students’ unions could play a significant role as students are often not yet well versed in their rights and tend to move at similar times making the timing of promotional work easier.
NUS gave both written and oral evidence to the Committee during their inquiry in May 2013.
Colum McGuire, NUS Vice-President (Welfare), said:
“Substandard letting agents have been able to get away with overcharging and shoddy practice for far too long and it is imperative that the government quickly take forward these proposals.
Tenants should be able to expect the same standards when they rent a home as they would if they were buying. The cost of student housing is rising at an alarming rate and while standards are improving in some places with the introduction of students’ union run landlord accreditation schemes, students need to know that their agent is not ripping them off.
It is a pity that the Select Committee have not recommended a national registration which would be able to shut down bad landlords who operate nationwide but nonetheless their proposals would be a huge leap forward for beleaguered tenants.”
Isobel Thomson, Chief Executive of National Approved Letting Scheme (NALS), says:
“NALS welcomes the publication of this report and are pleased to see that the Select Committee has recognized and included a number of the recommendations made in the NALS submission. What is being proposed here is a common-sense approach to improving the consumer experience of renting and letting. NALS is committed to raising standards in the private rented sector and a big part of this is transparency about letting agents’ fees and charges, the protection of landlord and tenants’ monies and educating the consumer about their rights.
There are too many examples of agents who close down with missing funds, only to reopen again and we would therefore welcome with open arms the enhancement of powers to ban such agents and the proposal to make client money protection and professional indemnity insurance mandatory. ”
Ian Potter, Managing Director, ARLA, said:
On regulation:
"We wholeheartedly welcome the CLG Committee's recommendations for regulation in the private rented sector (PRS). As the PRS continues to expand, it is more important than ever that both landlords and tenants are protected and fully understand their rights. ARLA has long campaigned for parity with estate agents in terms of regulation, and we are delighted to see that Parliament appears to be coming round to the idea too.
We hope the Government will listen to these recommendations, and introduce meaningful regulation of the sector as soon as possible."
On fees:
"ARLA has always advised its members to be clear and upfront about the fees they charge and the services associated with those fees. This stance is backed up by the fact that agents must also now adhere to the recent ruling by the Advertising Standards Authority which requires them to include all compulsory fees and charges in their quoted prices. This transparency should also extend to the language used in tenancy documents, and we encourage the use of plain English in all transactions."
Which? executive director, Richard Lloyd, said:
"We've been calling for lettings agents to come under the same regulations as estate agents since we uncovered an alarming lack of consumer protection and wide scale poor practice in this market. We hope the Government puts these plans into action as soon as possible. We also want the Office of Fair Trading to crackdown on hidden charges so that people know what they are signing up to and can more easily shop around."
Background
1. Following an investigation this year Which? believes that major letting agents are acting unlawfully by not being upfront about the fees charged to clients. We wrote to these agents asking them to be more transparent in order to comply with the law and although some of these agents have made changes, we still believe fees should be explicitly set out in all property adverts, on websites or at the first point of contact with an agent.
2. In March, Which? gave oral evidence to the Committee and has since submitted two separate pieces of supplementary written evidence calling for legislation relating to estate agents to be applied to letting agents, and for agent fees to be shown in adverts.
3. Which? first campaigned for improved protection and redress in the lettings market in 2007 when we called for an amendment to the Consumers, Estate Agents and Redress Act 2007 to require letting agents to join an approved complaints scheme, as sales agents are. While we are pleased the Enterprise and Regulatory Reform Act 2013, to be implemented in 2014,is going to give landlords and tenants access to a complaints scheme, we also want to see the OFT have the powers to ban or reprimand letting agents in the same way they can estate agents, and agents required to follow a code of conduct.
4. Later this year, the OFT is expected to publish guidance for agents on how consumer protection regulations apply to them.
Finders Keepers, the 2012 Sunday Times Letting Agent of the Year, has been following developments closely, attending hearings and providing its own recommendations.
Its response to the findings is as follows:
The Good
The CSC recommends that letting agency fees should be transparent, be published and double charging to both landlords and tenants should be banned, as the letting trade body ARLA has been suggesting
Rent increases could be linked to the Retail Price Index or equivalent for annual increases during a long-term tenancy. We do this now and it works well.
Letting agents should be governed by the same regulation as estate agents.
The CSC has recognised that a lack of rented stock is ‘the elephant in the room’ and that more needs to be done to encourage investors into the PRS. This includes dismissing calls for a cap on private rents.
A 5 year mandatory electrical safety test would help remove some of the ambiguity surrounding electrical tests
The Bad
The CSC called for standards to be raised within the PRS but has not recommended that improvements be made tax deductible. At the moment only like-for-like replacements are deductible but if a landlord chooses to improve the property in any way, these improvements cannot be deducted from the taxable income generated by the property.
The committee also recommended a simpler legal framework including a standardised tenancy agreement. A standardised tenancy agreement sounds good in theory but our worry is that it will be too vague to suit all properties leading to significant problems for tenants and landlords if it fails to account for different scenarios or types of property.
The CSC recommended a Key Fact Sheet to communicate rights and responsibilities to tenants but there are two substantial problems with this. Firstly, the Key Fact Sheet might soon be out of date if the legal framework is simplified and the Housing Health and Safety Rating System replaced. Secondly, we are concerned that a Key Fact Sheet would discourage tenants from reading the entire tenancy agreement.
The Ugly
The CSC has not recommended mandatory qualifications for lettings agents. These qualifications should be a matter of course as agents are dealing with complex laws and handling millions of pounds of other people’s money. Basic industry qualifications such as the NFoPP Technical Award should be required of all letting agents. Foregoing regulation of agents is a missed opportunity – the sector needs professionalising if it is to improve both its service and its image.
Caroline Kenny, Executive at UKALA, comments:
“At UKALA, we’ve long thought that we need bespoke solutions to increase accountability and transparency within the lettings sector. By working with UKALA and others, the government can ensure that future regulation is proportionate to consumer need and fit-for-purpose.
We agree with the Committee that using the Enterprise and Regulatory Reform Act to tackle the issue of consumer redress is a ‘positive first step’. We also echo the report’s call to make Client Money Protection insurance (CMP) and Professional Indemnity Insurance (PII) mandatory for all letting agents.
These standards already form part of the membership requirements of reputable industry bodies in the sector, such as UKALA, so comprehensive safeguards for tenants and landlords already exist.”
On the issue of providing longer tenancies to ensure a more stable tenure for families in the Private Rented Sector, Caroline Kenny comments: “Mortgage providers need to look at lifting their restrictions on tenancy lengths, as they present the biggest stumbling block to longer term tenancies. If a landlord is not restricted by their lender, letting agents can help facilitate a longer tenancy to meet the tenants’ request”.
UKALA’s main reservation centres on the report’s recommendations relating to the fees letting agents charge. Caroline Kenny explains: “The issue of fees is more complex than generally assumed. In principle, there are some fees which agents could display on property advertisements.
However, others are more complex and would need to be calculated according to individual circumstances. No two properties or households are the same, which makes it very difficult to operate a business according to standard ‘book prices’. However, it may be possible for letting agents to provide a ‘price list’ of the variable fees so that the tenant is aware of what they could be liable for in the end”.
UKALA provided both written and oral evidence to the Communities and Local Government Select Committee.
