Sean's Blog: February 15

The New Year has started with a bang for me and 2015 promises to be an eventful year for both the Scheme and the property sector in general.  A quick jaunt to Truro to speak at a Cornwall Residential Landlord Association meeting in the first week of January set the tone for a busy period for me and my team.  Educating landlords, as well as agents, is an essential part of raising industry standards. Remember - as far as the redress schemes are concerned - landlords are customers as well as tenants.

This brings me neatly to the hot topic of the moment and one that will no doubt cause heated debate both within the sector and beyond:

Fees!

This issue is a major source of the enquiries and complaints we are receiving and, deposits apart (which we have no remit over), make up at least an element of practically every complaint I have dealt with from both landlords and tenants.

I decided therefore to put out a press release to highlight this area and to start educating the industry on this controversial subject.  Brave? Yes, but the right thing to do? Definitely!

The story was published by all the industry press and it was not long before the mainstream media picked up on the issue. OK to be fair, agent fees has been an issue that has been bubbling close to the surface of the lettings debate ever since the devolved Scottish Government decided to ban all fees to tenants. Tenant groups and politicians have now picked this up as a key part of their agendas.

I therefore thought long and hard before dipping my toe into this particularly murky pool. Given we are entering a turbulent period in the run up to the General Election, this will be a highly political area. I felt however, that the subject needed to be looked at in an objective and reasoned way and that agents should be provided with guidance on what they can and can’t charge. Tenants and landlords also need help understanding what they can and should complain about and which practices are legitimate and legal.

Given the importance of this area and the fact that the redress schemes are now a major part of the mainstream lettings industry, it would have been remiss of me to duck the issue.  So in for a penny, in for a pound.

Following our initial foray into the media, we were contacted by BBC Breakfast with a view to making a comment on tenant fees. A film crew duly arrived at the PRS office and I was wheeled out to answer the questions. Of course, as a news item, they concentrated on the most problematic part of the industry and the controversial practice of cross subsidizing the fees charged to landlords by charging the tenants increasingly higher fees. We all know this practice goes on and that is illegal but despite the fact that the majority of the industry plays by the rules, significant minorities of agents are prepared to steal a competitive advantage by pushing the boundaries. If the industry fails to deal with the rogue element, then the compliant sector will pay the price.

I did a follow up interview with BBC Radio Five Live as part of the Adrian Childs show and I was also live on Lyca Dilse Radio - a major independent Asian network. No doubt this debate will run and run so it would be prudent for all agents to get fully up to speed with what you can and can’t do.

The rules on fees are a mixture of legal and best practice. Laws on advertising, disclosure and fair contractual terms underpin the legal framework which governs the way you display and present fees.  They are soon to be joined by full transparency where, under the forthcoming Consumer Protection Act, you will be legally obliged not just to show where fees are added but a breakdown of both sets of charges for landlords and tenants with specific amounts and services shown.

Existing laws make it illegal to hide fees, double charge or make a hidden profit so transparency will ensure that the consumer is fully aware of what they are paying for. Charges should also be fair and proportional to the work undertaken and whilst you can at the moment charge a premium for the service to both sets of customers, you have to demonstrate that you have provided a service.

In addition to the law, there is plenty of best practice and guidance available to help clarify the issue.  This industry standard has been reinforced by rulings made by statutory and non-statutory bodies that are part of the regulatory regime. The Advertising Standards Authority and the former Office of Fair Trading (now incorporated into the Competition and Markets Authority - CMA), have visited this area many times and have produced clear guidance on what is and what is not acceptable.

The industry bodies also have clear guidance and codes of conduct that reinforce the principles and practice when it comes to charging fees.  There is a fair amount of consistency between all this guidance therefore we at the Property Redress Scheme have taken the decision not to duplicate things and impose a code of conduct of our own. I instead use all of the established guides (including those from the other redress schemes) to establish industry standards.

If you are a member of an industry body, such as ARLA or UKALA, when you join us or you are a professional such as a surveyor, I will apply the relevant code to which you signed up to even if this code exceeds the base minimum legal requirements. All the major bodies are also signed up to the Government recommended Guide to the Private Rental Sector, a link to which can be found on our website.

I have to say though, I particularly refer to the OFT/CMA guidance and will where possible use this to establish whether a fee is unfair, excessive or not applicable.  Remember I have the power to reduce or even prohibit a fee and whilst my decisions do not set precedent and often apply to the specific complaint, I try to keep a consistent approach and will make recommendations of how the agent can become compliant with best practice.

We have now finalised some easy to follow guides on fees here. We also recommend that you look at our case studies, showing how previous complaints were determined. They are anonymised learning tools for all member agents to benefit from and are a welcome addition to our growing resource centre that we provide as an inclusive benefit of PRS membership.