Office of Fair Trading hits out at letting agent fees

Standards must be raised across the private rented sector to make the market work better for tenants, the Office of Fair Trading has said.

The OFT yesterday published its report into the private lettings market – in reality, a report on the role of letting agents, rather than landlords.

But while highly critical – and in particular, calling for letting agents to spell out their fees in clear tariffs – the report stops short of proposing mandatory regulation.

The OFT says agents play a pivotal role in the lettings market, but says that “agents’ interests are not always aligned with those of landlords who instruct them or the tenants who may rely on them for guidance”.

The OFT calls for a redress service to be made available to landlords and tenants, which suggests that it could be made mandatory for all letting agents to belong to an Ombudsman scheme.

For its report, the OFT analysed nearly 4,000 complaints made by both tenants and landlords. It found that both tenants and landlords were concerned about fees and charges levied by agents and poor service provided, and that ‘surprise’ charges were introduced or ‘drip-fed’ once contracts have been signed.

The report sets out a number of recommendations and what it calls ‘next steps’ for Government, industry, enforcers and others. These include:

    •    Better compliance with legislation and in particular better up-front information. The OFT would like fees to be set out in a clear tariff of charges.â?¨
    •    A general redress mechanism so landlords and tenants can sort out problems when they occur.â?¨
    •    More consistency within the industry so that common principles are applied throughout the industry, such as what information is used for pre-tenancy checks.â?¨
    •    Government, industry, enforcers and consumer bodies to agree a national strategy.â?¨
    •    Agree an enforcement strategy for traders who do not comply with the law. â?¨
    •    Initiatives which make it easier for landlords and tenants to assess quality, such as recognised logos.â?¨
    •    Working with industry and consumer bodies to develop joint educational material such as ‘quick guides’ to help tenants and landlords understand their rights.

The OFT will be hosting a series of events with parties involved in the lettings industry to discuss its findings and recommendations.

It said it will also develop new guidance on consumer protection laws for letting agents and review existing guidance on unfair terms in tenancy agreements.

Cavendish Elithorn, senior director of goods and consumer at the OFT, said: “Our findings show that tenants and landlords are often dissatisfied with their agents, but we also know that most agents want to do the right thing.

“It’s important that tenants ask for key information, but we also believe that Government, industry and enforcers working together can have a real impact and improve overall standards in the lettings market.

“This report sets out our view on what improvements could be made to address concerns with this market and we are keen to play our part in bringing together those involved in the lettings industry to focus efforts where they are most needed.”

The OFT looked at consumer complaints about letting agents to Consumer Direct during 2011. Of the total, 1,557 complaints were about fees and charges; 1,211 were about agents providing poor services; 1,015 were about deposits; 668 were about repairs; and 565 were about unfair business practices.

The full report, together with its annexes, can be seen at the link below. For industry reaction, see the next story.