Should tenants have to pay letting agent fees?

This week Shelter published a report on their investigation into letting agent fees. Chris Norris shares the NLA’s reaction.
This week Shelter published a report on their investigation into letting agent fees. Chris Norris shares the NLA’s reaction.

This week Shelter published a report on their investigation into letting agent fees. Chris Norris, the NLA’s Head of Policy, shares our reaction.

The report found that letting agency fees could be pushing renters into debt or cutting back on food and heating and as a consequence, the charity has called for an end to letting agency fees to renters in England.

So fees traditionally charged to tenants to set up a tenancy, including ‘administration’ fees, ‘holding’ fees, credit check fees and ‘check-in’ fees could soon be charged to landlords.  Shelter suggests that  asking landlords to cover the costs of setting up a tenancy is a fairer way of doing business. They say “it is landlords, not renters, who have the power to choose one agency over another, to negotiate the fees charged and to terminate a contract”.

The NLA agrees that essentially, a landlord using an agent has agreed to pay for their services, including the establishment of a tenancy and a variety of due diligence activity, which is intended to reduce the risk of the tenancy failing. And from their point of view it is unhelpful for prospective tenants to be faced with unpredictable or excessive fees for accessing their property as it reduces the prospects of finding a tenant.

However, there is good reason for some initial costs to be incurred by a prospective tenant before they have committed to a property. Before agreeing a tenancy it is important that an agent is able to verify that an applicant is who they purport to be and that the information they have provided is truthful and accurate. In the NLA’s view it is appropriate that the applicant contributes towards the cost of this early verification as it provides a safeguard against speculative attempts to rent property and attempts at deception. It also means that the landlord is not left to cover the cost of applicants withdrawing from the process once costs have been incurred.

Of course it is vitally important that all costs are made clear before any commitment to proceed is made and that no further undisclosed fees materialise once the tenancy is agreed.

What are your thoughts on the issue of letting agent fees for tenants?

 

 

7 thoughts on “Should tenants have to pay letting agent fees?

  1. I think your assessment is valid.
    It is also only fair that a tenant pays a fee to reserve a property, once a landlord has made an offer and taken the property off the market, to avoid the situation where that tenant just changes their mind and / or fails to turn up on move in / agreement signing day.
    This can be very expensive for the landlord and could easily lead to a void equivalent to a month rent – therefore I recommend a least a 3 week reservation fee is applied, which is lost if the tenant just changes their mind.

  2. I generally agree. I was actually quite surprised when I found out how much my previous agency had increased it’s fees to prospective tenants.
    But at the end of the day, someone has to pay for various services – and if the landlord pays then ultimately it goes on the rent.

    Next time I’m looking for a tenant, I’ll be seriously considering whether to use an agent at all, or at least cutting back to perhaps only advertising and viewings. Lets just say that over 9 years, my opinion of letting agents started at neutral and has been going down ever since. Or perhaps my expectations of competence, and being asked about important decisions regarding *MY* properties, is somehow too much !

    1. In reply to Simon, we would suggest that you look for competent letting/management agents. We are property investors as well as letting/management agents, and have been tenants at a point in our lives. We are appreciative of the expectations of tenants, property owners and agents. We try to manage the expectations of tenants and owners to avoid confusion, conflicts and disappointment. There is also some mileage in the saying “you pay peanuts, you get monkeys”.

  3. We are property investors as well as letting agents and have been tenants at some points in our lives.

    In our lettings business, we originally did not charge tenants for taking up a tenancy. That made it easy for tenants to take on a tenancy and also made it very easy for them to change their minds at little or no cost to them. We now charge tenants a reasonable processing or administration fee and explain the circumstances for the charge.

    We have found that charging tenants gives us the following benefits, a tenant would carefully consider before committing to rent a property and paying the processing fee, a stronger commitment to renting the property as they have then invested something tangible and valuable into the process, evidence they are capable of raising funds/managing their money when they are actually tenants. Less time and expense in dealing with persons who are not really prospective tenants. It also allows us to match income to expense better.

    Legislation can lead to higher costs and inefficiencies which has to be borne by the renter in the end. If there is nothing in the deal for the tenant, agent and landlord, there is no deal. Balance or reasonableness would be influenced by your perspective or position in the 3 way relationship and/or perhaps political persuasions.

  4. We carefully chose our agent to minimise the fees to the tenant. Some local agents charge up to a full month’s rent for ‘administration’ and ‘reservation’ and ‘credit check’ fees – in addition to the fee I pay as the landlord. We didn’t want tenants to be paying £500+, just to get the keys.
    We have had issues with tenants ‘window shopping’ – i.e. reserving our property whilst still looking at others and then backing out at the last minute, so we decided to charge a reservation fee, so they would prove their commitment.
    What we now do is charge a £250 ‘non-refundable reservation fee’, which is credited to their rent account when they take on the tenancy on the agreed date, but is forfeit should they withdraw your application for any reason.
    This makes sure that people have committed, but we didn’t want it to be a ‘fee’, hence the crediting to their rent account, if they keep to their side of the agreement.
    We had a tenant refuse to provide a guarantor last week, despite being warned that she would forfeit her reservation fee, but she still chose to back out. It has at least helped us to cover our costs for re-advertising.

  5. Surely the real questions are “How much these fees”, “How reasonable these fees” and “Are these fees genuinely justified.” I suspect many Letting Agencies are simply taking advantage of a situation and charging wholly unreasonable amounts for what are essentially fictional tasks, whats more there is no justification for surprise or additional charges after a contract has been signed!

    Administration costs – really? How much does it cost to hit print a template agreement and watch a new tenant sign it (in some cases a reoccurring cost to the tenant). Surely this cost has already been covered by the Landlords fees? Check-in fees? What? Just hand over the keys it’s not that hard. The tenant doesn’t need to be carried across the threshold. As far as I see it. The real problem is greed – let’s see some transparency on these charges! Personally, I’d rather be in a market with lots of possible tenants ready and ABLE to rent without making sacrifices than one with tenants barley able to make their rent.

  6. @William, “Charging a tenant a processing fee… for a stronger commitment” and it doesn’t hurt that that money goes into who’s pocket?

    +1 vote for the system employed by @Clare.

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