Letting agent fees for landlords: regulation changes 2015
Are you a landlord that uses letting agents? Our latest post guides you through regulation changes for letting agents regarding fee transparency.
Letting agents must display their fees in offices and on websites so landlords have a clear idea of any charges that are due under a new law that came into force on May 27, 2015.
Flouting the rules could lead to hefty fines of up to £5,000.
Introduction of the measures under the Consumer Rights Act also goes hand-in-hand with an investigation by consumer watchdog the Advertising Standards Authority (ASA) aimed at making sure letting agent adverts are not misleading by leaving VAT off charges.
To help landlords get up to speed with the recent new law, here are the answers to some frequently asked questions.
Why is this new law needed?
The government wants to bring some trust and transparency to the private rental market without regulating letting agents. The new rules address concerns that some unscrupulous letting agents were double charging tenants and landlords for the same service.
The aim is to make all letting agents display their charges including VAT so landlords can shop around and compare services and prices.
Where does the new law apply?
The rules apply to all letting agents in England. Scotland and Wales have their own rules – for instance many letting agent charges are banned in Scotland.
What charges are covered by the regulations?
Any charges a landlord pays a letting agent for renting out or managing a home under an assured shorthold tenancy agreement from May 27, 2015 are covered by the rules.
This covers any fees charged in connection with finding a tenant and managing the tenancy. The idea is a landlord should know exactly what fees are due and when.
The only charges that don't need displaying are:
- Rent paid to a landlord
- A tenancy deposit taken as security against damage or breaching a tenancy agreement
- Any fees, charges or penalties which the letting agent receives from a landlord during a tenancy from another person.
The Consumer Rights Act doesn't reduce a letting agent’s responsibility under other regulations, such as ASA rules about explaining optional fees and including VAT in advertised prices.
The regulations call for letting agents to display the fees online and in any office where they meet landlords.
The fees should be clearly visible and landlords should not have to ask for a copy.
The rules say the list should be comprehensive without any hidden charges. Any charges must be clearly explained and pricing should include VAT.
Typical letting agent charges cover:
- Marketing a property
- Taking viewings
- Checking tenant references and credit profiles
- Drafting tenancy agreements
- Taking a property inventory
The fees should also show whether the charges relate to a home or each tenant.
If a fee is not fixed, a clear explanation of how the charge is calculated must be displayed.
What about charges for repairs and maintenance?
These are management or optional fees and must be explained upfront. For instance, if the letting agent recommends a gardener without charging a fee or taking commission from the tradesman, then the gardener’s fee doesn't need publicising.
Should the letting agent receive money for recommending the service, the charge needs posting in clear view in their office or online.
Who sets the fees?
Letting agents can set their own fees – the regulations do not suggest likely or acceptable charges.
Double charging banned
Letting agents can split a cost between a landlord and tenant, but cannot charge both for the same service.
Letting agents must also clearly publicise if they belong to a client money protection scheme and which redress scheme landlords can take complaints to, such as The Property Ombudsman.
Landlords managing their own letting properties
The regulations apply to letting agents not landlords. If a landlord only manages their own properties, they don't have to observe the rules, but if they let property for other landlords they are likely to be covered by the Consumer Rights Act. Find out more: Competition and Markets Authority Guidance to Letting Professionals
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