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Tenants are being ripped off by letting agent fees

Letting agents need to be regulated to the same level as estate agents, an independent think tank has argued.

 
Tenants are being ripped off by letting agent fees

Tenants are being ripped off by letting agents which charge complex, unclear and very expensive fees, new research has revealed.

The range and type of fees charged by letting agents varies considerably depending on where you live, according to independent think tank Resolution Foundation which mystery-shopped 25 letting agents based in London, Manchester and Gloucester.

For a one bedroom flat in London, for example, upfront costs – deposit, admin fees and rent in advance – totalled some £2,166 compared to £1,028 in Manchester and £1,094 in Gloucester.

Administrative fees meanwhile ranged from £95 to £375 across the three cities. And deposits ranged from £487 in Manchester to some £1,099 in London. This proved a big problem for many tenants as they often had to hand over a new deposit before getting their old one back, Resolution highlighted.

What’s more, just two of the letting agents displayed the costs of renting on their websites which meant many renters often only discovered the charges after they had decided to rent a property.

Resolution claims tenants are being let down by an unregulated market and is calling on the government to:

  • Regulate letting agents to the same level as estate agents
  • Make it compulsory for all agents to sign up to an ombudsman service
  • Force agents to display charges to tenants and landlords on their websites and in adverts in a way that is easily comparable across agents
  • Consider ways to make it easier for tenants to transfer deposits between landlords

Vidhya Alakeson, director of research at Resolution, said: ‘We need more transparency so tenants at least know what fees they’re facing and to help create a more competitive market’.

‘Given that an increasing number of families have no option other than to rent long term, we need to question why letting agents are not regulated to the same degree as estate agents,’ he added.

Christopher Hamer, the Property Ombudsman meanwhile said: ‘The Government does not see regulation of the sector as a priority and I, therefore, welcome the recommendation of this report that all letting agents should be required to be registered with an ombudsman scheme so that, at least, landlords or tenants can gain redress where they have been disadvantaged by an agent’.

27 comments so far. Why not have your say?

Nick74

Dec 08, 2011 at 12:34

Finally, some tenant protection legislation proposed for private tenants.

Nb there's a not so subtle difference between legislation that ensures that landlords have to provide habitable accommodation, not unreasonably withhold full deposits and allow tenants "quiet enjoyment".

Additionally the law may be slow but if you want to evict someone for non payment and attach a county court judgement that's available to you - I do agree that can take a while, but the vast, vast majority of private tenants don't abuse this (plus you have 6 weeks deposit for this eventuality, and can take out insurance)

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ron woodworth

Dec 08, 2011 at 12:38

my daughter and her partner work in Leamington Spa which is a fairly expensive renting area. a small 2 bed apartment will cost them c£675 pcm. ACCORD ( are they part of the Yorkshire BS group ?) one of the local Letting Agents want to charge them £475 being references £75 x2, admin fees £50 x2, production of Tenancy Agreement £150 (actual cost 10p for a photocopy) and £75 for an inventory. thus with 1 months rent and another for deposit upfront there would be a grand total of £1825. can anyone beat that for unmitigated greed ? incidentally at the moment my daughter is a tenant with 2 other girls of a house where ACCORD is the letting agency and every time one of the tenants move out ACCORD charge £300 to change the names on the Tenancy Agreement without actually finding the tenant themselves !!

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ennui

Dec 08, 2011 at 12:51

My wife works in a lettings agency part time. She was shocked to find out what it costs to get references compared to what the agent was charging ie £10 cost, £125 per tenant charge. As per Ron above once you add in the admin fee and and tenancy agreement it starts to get truly ridiculous. Bear in mind they are also charging the landlords a healthy fee. Estate agents have a bad reputation for a very good reason - they charge a lot for doing very little. It is extraordinary that this business is not currently regulated - it should be.

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S G

Dec 08, 2011 at 12:54

Being a renter, I have used a number of agencies, they all lie and cheat. How do I know, I have caught each one out on several occasions, then they deny what they have said. The charges are a rip off!

But they know your hands are tied, you pay up or you are stuck without a roof over your head. One wanted to charge me £150 for renewing my tennacy which was the exact same contact, with the dates changed and printed off.....

I think the sooner the regulation the better...

But going back to the lies, my friends mum rented a property and said her tennet was moving out early, so if I contacted the agency, and take on the remaing 4 months lease, at which point we where going to drop the agency. So went to the agency put in the offer, they came back saying the landlord rejected the offer, and only wanted someone long term.... The agent was well imbarrased when we both went in to complain..... And this is one of many stories. As someone who has debated buying on citywire numerous times, people forget how expensive renting can be and the cost of moving, every year or couple of years can really be.

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LouisV-W4

Dec 08, 2011 at 13:22

Nick74, why do you have to turn everything into a tirade against landlords. This article is about Letting Agents ...and some of them rip off tenants as well as landlords.

Landlords are charged significant amounts to onboard a tenant, including tenant find fees, referencing, STA and inventory. Landlords are also charged annual renewal commissions, even if the agent does nothing for them and despite the OFT winning a High Curt ruling against possibly the worst offender; Foxtons, who are still charging landlords renewal commissions for doing nothing ...so much for the OFT; the consumers' champion!!

I would strongly urge all prospective tenants to question why they are paying for these if the landlord is being charged for the same work.

I would also say that they should shop around for an agent. Most properties for rent these days are advertised online, and are available through multiple agents. The agent primarily wants the landlord's fees and all the potentially lucrative 'value added' services they can provide, plus highly profitable and undeserved renewal commissions. So, haggle.

Concerning deposits, these are a multiple of the monthly rental, and London rents are higher than Manchester. However, I agree there is an issue with a tenant getting the deposit returned before renting another property, and I cannot see how this can be changed. A landlord needs to be satisfied on the day the tenant vacates that the property has been left in good order in accordance with the terms of the STA.

There remains a problem where the deposit is held by a letting agent, albeit this is now covered by law. Certain agents hold the deposit themselves under an insurance scheme such as 'MyDeposit', and it is possible that the agent could delay return of the deposit for a week or so, even when the landlord has given the all clear. The landlord cannot control the agent's actions ...unfortunately.

Landlords can use the same scheme, so a tenant could ask the agent to request the landlord to hold the deposit. It would be safe. However, I suspect they may not be too happy with that as they won't be earning the interest on those deposits.

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Goran Batiatus

Dec 08, 2011 at 13:44

The sad truth is that peolple get ripped off in heavily regulated industries. eg the recent £10 million fine given to HSBC for ripping off very elderly people. The cost of being in a regulated industry is also used as a reason to charge more. Again look at Financial Services. I would also point out that costs are always regional. So in London you will always pay more.

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phildoc

Dec 08, 2011 at 13:54

We really need a landlord registration scheme throughout England and Wales as there is in Scotland. In my view having myself rented several middle to high value properties, fees should only be charged to the Landlord as the letting agent is acting on their behalf. You wouldn't expect a housebuyer to pay the estate agent fees!

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Andrew Bedford

Dec 08, 2011 at 14:25

i think based on Ron's comments above, a key issue may be is a letting agency is treating people fairly if it charges the tenant and the landlord for the same thing. I am thinking about

- Production of Tenancy Agreement (Why charge the tenant when this is usually part of the service for the landlord - for which the landlord is being charged

- An inventory (Again, the landlord is usually charged for that.

So some form of regulation is sensible BUT not an overly burdensome\ costly system that we have with investments etc. as the costs must fit the market.

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Nick74

Dec 08, 2011 at 14:52

Louis v

A strange argument - landlords choose to employ letting agents to let the property, and if someone who works for a landlord is ripping off tenants then why is the landlord not culpable? Your reduced agency fees are often propped up by increased charges on tenants for renewals, background checks etc.

You say that letting agents charge landlords high fees - well, that's again your choice to use them.

Contrary to what you say I have mostly found that landlords use a single letting agent (I'm London based, and now own), however I have increasingly seen landlords use the agents to find someone, set up legal documentation then manage the property themselves - this works better.

For "good" tenants protection is sadly lacking - broken windows, boilers, cookers etc are not fixed in a timely fashion, and a simple remedy like withholding rent pending the fix of a something essential is a contractual breach. I have yet to see a contract that includes clauses such as "the following items will be remedied if broken within x timeframe otherwise there are penalties against the landlord", which the landlord could easily back-to-back contract with an SLA with the letting agent.

This would of course cost the landlord more, and this is perhaps the nub of the problem: many landlords are over-leveraged and are trying to reduce costs and increase income, which inevitably leads to annual rent reviews, volatility and instability for tenants, and the concomitant costs of either moving or renewal.

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ennui

Dec 08, 2011 at 15:05

The key here, both in terms of fairness, and simplicity, is for lettings agents to take no fee from anybody other than an agreed percentage of the rent from the landlord. Whatever costs they have can be built into this fee, along with their profit. This of course would mean that these fee rates would rise from current levels. However agents would then have to compete with each other on service levels and fees, all on a level playing field. Landlords would be incentivised to find the most appropriate deal, and the end consumer, the tenant, who does after all pay for it all, would benefit from the clarity and straighforward competition.

If legislation only allowed a single fee, the agents percentage of the rent, you dont even need regulation. Simples!

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LouisV-W4

Dec 08, 2011 at 15:51

Nick74,

Where are these 'reduced agency fees' you speak of?

I choose a letting agent to find a tenant. I do not 'employ' the agent. Before that happens, I have to sign their t's & c's. There is no mention of the 'service' they are providing for the tenant, for which they charge. It's wrong, but I have no control over the agent's business, unless I find something with which I am unhappy and can legally address.

So, now I manage my own tenant in London (and still get charged for tenancy renewal by the agent), but use an agent where it is impractical.

Some agents are more 'demanding' than others, and Foxtons spring to mind.

Some landlords are worse than others, although you seem to think we are all as bad as each other.

Some tenants are worse than others. How would you like it if someone signed a contract to pay you rent, then refused to pay for months on end, and then left the property with £000's of damage?

Landlords are now using the internet to band together to identify these bad tenants, share their experiences, and carry out their own extensive vetting service using Experian rather than rely on the agent. Hopefully, this will avoid agents/landlords taking on bad tenants, and those tenants will realise their actions will eventually result in being unable to rent anywhere in the UK.

I would encourage all landlords to register for this free service at http://www.landlordreferencing.co.uk/

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Nick74

Dec 08, 2011 at 16:20

You contract with an agency that if they find you a tenant you will pay them certain sums - not sure how you wouldn't describe them as employed by you.

If you enter into a contract with a tenant that the tenant then breaches then the law clearly allows you to seek remediation via the courts - I sympathise with landlords that it may take a long time, however you are paying for changes in the law due to the "sins of your fathers", who were unscrupulous in their methods for evicting tenants.

Also once you take these tenants to court and get a court order it's registered on Experian etc, so whether you get the money back or not there is still a legal register identifying the ex-tenant as a debtor, and your background checks should identify that. You can of course also take out insurance against rent default.

I will be very surprised if a "bad tenant" register lasts much longer - unsubstantiated defamation of character will lead to a civil suit and substantial damages being awarded, so a very strong note of caution is needed before identifying "person X is a non payer/messy tenant".

For real progress a joint tenant-landlord site where either party can be "recommended" is a much more inclusive proposal. "speed of response to emergency repairs", "frequency of late payment of rent" are all fairly factual and could easily be recorded.

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LouisV-W4

Dec 08, 2011 at 17:28

Nick74,

When employing the services of an agent, I am doing so on their terms, not mine. If they were my terms, we wouldn't be having this discussion. Remember, the article is about agents ripping off tenants.

Even you have to accept that reverting to the courts is unsatisfactory on all fronts. If a tenant fails to pay rent and causes damage, it's likely that tenant has no money!

You should also note that if a tenant receives a CCJ, then the landlord has to ask the credit reference agencies to include it on the tenant's record. They do not do so as a matter of course (I don't know why) which means many bad tenants slip through the referencing net. Hopefully another little- known loophole closed!

If you would care to set up a joint tenant/landlord site, I will gladly support that. In the meantime, LRS has clarified the 'name and shame' issue, and any 'comment' I make concerning a bad tenant on the LRS site is substantiated, so defamation of character is unlikely to succeed in court.

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Allen Williams

Dec 08, 2011 at 18:42

My area is that of the agents' flags which are depicted in the photo in the article, and it is one where multiple agents are rarely used. In practice, one cannot shop around (as a prospective tenant) between them as to select the least-cost agent would unreasonably restrict the range of homes to choose from.

Without saying that the following comment necessarily includes all or any of the agents appearing in the photograph, I can confirm that fees payable to agents by tenants or prospective tenants are substantial and sometimes exorbitant given the amount of work involved, and the fees already charged (sometimes for the same service) to the landlord. On lower priced homes (because they are usually flat-rate charges) agents fees can amount to the equivalent of a month's rent. Clearly this makes it expensive for tenants to move and unreasonable to expect them to do so when all that is granted is a six-month contract.

Clearly there need to be rules limiting the extent of such charges and whether they can be levied at all.

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Paul Barrett

Dec 08, 2011 at 21:08

There is clearly a division in the way landlords operate with a consequential effect on the costs for LL and tenant.

There are 2 ways a LL may market their property.

Advertise via various outlets or use a letting agent.

Clearly there are various levels of service that that a LL may purchase from a LA.

It is up to the LL as to how he wishes to market his property.

For ALL LL who DO NOT wish to use the services of a LA then it is perfectly viable that the LL manges things themselves at considerable cost savings for both LL and tenant.

There ia absolutely NO need to use a LA if you wish to manage things yourself.

Life is all about choices and LL have to determine what is best for them.

Previously the ONLY reason you had to use a LA was that only they could advertise your rental property online.

Name me any prospective tenant that doesn't first check out available property online.

There are online LA that for as little as £29.00 will advertise your rental property on ALL the major websites which is exactly what a LA will do but for considerably more than an online LA.

So these are the costs if you wish to manage your own rental property to make things cheaper for you and your prospective tenant.

£99.00 max cost for online tenant referral

for as long as the property is available.

Make sure you also use tenantid.co.uk and landlordreferencing.co.uk in addition to the RGI checks.

£99.00 max cost for RGI including credit check(Max £50000.00 per claim including legal costs for 1 year; no further credit check if further policy on same tenant is required even if their circumstances have changed) Also works for a guarantor.

£89.00 contents insurance with loss of rent cover and malicious damage and tenant theft and white goods and bathroom units,

I do not charge tenants for cost of AST; I print it off for free online.

In fact ALL relevant documents are available free online.

I pay for the 1st DPC and if the tenant wants to have a further AST

they have to pay the fee for protecting the deposit if I wish them to have another AST; otherwise they proceed onto a SPT.

If I wish to increase the rent and and do so via an AST rather than a Section 13(2) then I would pay for the new DPC.

I am sure that ALL LL ARE aware that ANY change to an AST requires a NEW DPC to be issued with a consequent additional fee!!?

Only use the mydeposits.co.uk deposit scheme as this is the ONLY deposit scheme that allows the LL to hold the deposit; therby assisting their cashflow and interest credit.

LL should be aware that it does not matter if the deposit is held in the other 2 schemes and the LA runs off with the money the LL is ultimately liable.

Therefore the LL should guarantee that they will have the deposit monies and the only way you can GUARANTEE this is for the LL to hold the monies via the mydeposits scheme.

I now require 2 months rent as a deposit and 1 months rent in advance.

There are no fees payable by the tenant.

I do not charge for an inventory as I obtain the forms for free online and I do the inventory.

I do not charge for letters etc to tenants; I write them out whilst watching TV.

So to sum up the max cost to me for sourcing a tenant is

£99.00 RGI

£89.00 Contents Ins

£30.00 DPC fee

Total £218.00

It is possible to obtain these cheaper.

I can't tell you where these policies may be obtained as I don't think I am allowed to under Citywire posting conditions.

You just have to do the donkeywork on line; it is all there for a LL to avail themselves.

If you can't be bothered then you will have to stump up fees to LA as will the prospective tenant.

I would think that tenants would actively wish to seek out LL that do things for themselves and pass on the cost savings to the tenant but achieve a happy tenant who does not lose any money in charges.

Yes they have to come up with a larger amount of funding to obtain the tenancy but providing they behave themselves in complying with ALL the terms of their tenancy agreement then they wWILL recieve their deposit back.

So in my case my rental is £1000.00 pcm.

The prospective tenant has to come up with £3000.00; that is it!!

So my advice to tenants go online for rental property sourcing as this is where you will find LL who do not use expensive LA and who may pass on cost saving to the tenant.

What I have done with some tenants is take the 2 months rent as a deposit as you have to issue a DPC within 14 days and soon within 30 days.

I then issue a covering letter to be attached to the tenancy agreement that they may pay the 1st monts rent in addition to the normal monthly rent payable in advance over say a following 2-3 month period.

I issue receipts for thes payments.

I also indicate that providing they keep to the payment schedule they will be deemed NOT to be in breach of their tenancy agreement.

These are all part of the AST so there is no way that I can wriggle out of what I have agreed to.

My tenants have been perfectly happy with the arrangement.

Clearly not using LA is not possible or desirable from some LL perspective.

Clearly there is a point of market differentiation between LL who choose to use LA and those that choose not to.

Tenants will wish to hunt out those LL that do not use LA as they will be more than likely to offer a better and cheaper proposition.

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Paul Barrett

Dec 08, 2011 at 21:27

I forgot to mention the contents poicy also includes loss of rent cover which is different from RGI.

This works in the case when perhaps your properety is inbetween tenants and suffers loss of amenity.

Meaning you can't rent the property out until the buildings policy has repaired the property.

Who pays rent and the mortgage in the meantime.

Ans nobody.

If the LL does not have a rather large sinking fund then they could face repossession.

It happened to me 3 times.

The only reason I retained my properties was credit cards.

They were flats and until a few days ago I had been unable to source an insurance policy that offered a standalone policy.

99% of insurance policies require you to have a buildings policy before you may have the add on bits which give you the loss of rent cover.

As I am sure you are aware most flats are covered by a block buildings policy.

Therefore you CANNOT obtain loss of rent cover as it is illegal to have 2 buildings insurance policies on the same flat.

This is a unique problem affecting LL owned flats and does not affect houses as clearly such loss of rent cover and add ons mau be obtained with the buildings policy which is not an avenue open to LL owning flats.

My standalone LL contents policy covers up to £12000 loss off rent whilst the flat is being repaired!!

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Paul Gill

Dec 08, 2011 at 21:38

As a landlord I can only say that if it was easier to get tenants out that dont pay and landlords had some protection instead of only the tenants then we would not need these greedy letting agents who are basically getting between 10 & 15% of the landlords rent for almost doing nothing.

If we get sensible legislation and protection for good landlords then this would introduce competition and their fees should come down, at the moment its a monopoly as the landlord has to rely on getting their money.

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A thought

Dec 08, 2011 at 22:23

The letting agents are rip offs, I was just recently flat hunting and I asked the agent about their fees (they didnt volunteer the info, only foxtons mentioned it straight away...though they have their own issues). I was looking for a two bed property and the guy said the fees would have been around £450! thats just their fees alone I havent even found the 6wks deposit yet plus moving expenses. I was so shocked so I said what is that for...he said for the service..I said what service?! he mumbled something about references... what a rip off! something needs to be done..when I rented my old place three yrs ago the fee was ~£175 and even then I thought it was extreme, but it has definately skyrocketed. Its also forcing people to take risksn by going directly to rouge landlords or open themselves up to scams

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S C

Dec 09, 2011 at 11:30

I am currently a landlord and a tenant ( temporarily due to work commitments ).

I have seen how the agent plays both sides as I have had to pay both fees recently.

If I was closer to my flat I would try out finding a tenant myself to see how much work it is. The main problem being availability for viewings but an open day could be an option.

1. Tenancy agreements - I had to amend mine (as a landlord) as it claimed the tenants were "clients" of the agent and therefore I would have to pay the SAME fee (8%=VAT) again every 12 months even if the tenant doesn't change ! 100% fee p.a. for no work !

2. Credit checks - the agents just outsource this to another company ( absolving them of any responsibility). In my experience (as a tenant) my referees were not even contacted ! There are plenty online and for about £35 and I would insist on referees being called at least.

3. Maintenance - the property management fees do not reflect the level of service given so I don't use it as a landlord. But as a tenant in a "managed property", the agent has been hopeless. When faced with leaking pipes and non working appliances he said he had never had to do this before ! I sorted the leaking pipes and paid for the appliance repair which I was forced to deduct from the rent (which is against the tenancy agreement) as the agent just dithered as he didn't want to "bother" the landlord.

Agents (Lettings) seem to have an unjustifiably high opinion of themselves so if you do have to use them just bear that in mind.

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A thought

Dec 09, 2011 at 11:56

So true S C and as a tenent I had to pay about £60 when my contract was renewed with the same terms and had to pay them a check out fee of £100 when I wanted to leave. I am sure they also charge the LL at these times as well. It a big business ripping people off...

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Anonymous 1 needed this 'off the record'

Dec 09, 2011 at 12:36

Hi Nick 74,

I do not use agents, they have always caused me problems in the past. I use my own contracts which are based on years of experience and I consider them to be fair (e.g. about wear and tear) and to be quite tenant friendly. One aspect I like is the rental period running from midday to midday as with hotels. Much more realistic regarding time of day when people move and avoiding confusion about start and end dates, eg from the 1st to the 1st of a month not different dates.

They include a clause stating that if the landlord does not repair something within a reasonable time (without checking I think it is about 3 weeks) the tenant can themselves arrange for the work to be done and invoice the landlord.

All contracts should have such clauses.

Keith

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Anonymous 1 needed this 'off the record'

Dec 09, 2011 at 12:45

Another experience of mine is when a local letting agent recommended a firm to do a central heating repair. After inspection the firm rang me to say they did not realise I was managing the property myself and could not go ahead without my permission. The quotes they gave were very high.

I got the work done at a fraction of their quote. Makes you wonder!!

Keith

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Nimblenod

Dec 09, 2011 at 13:07

Speaking as neither a landord nor a tenant, I am astonsihed at the disarray in the essentiality of this business which is the provision of a roof over perople's heads.

Firm and precise regulation by Government is clearly needed.

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Anonymous 1 needed this 'off the record'

Dec 09, 2011 at 13:10

It is always simpler to get things right up front. Many issues relate to the tenency contract and the LAs terms and conditions.

Having a landlords registration scheme does not correct such flaws. Perhaps need to have up front documentation vetted//approved/regulated!!

There is Residential Letting Agents Association. Maybe they for one should start earning their keep.

Keith

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eugene o'neale

Dec 14, 2011 at 13:13

In Scotland it is a criminal offence to receive a 'premium' from a tenant i.e key money,admin charges,cost of preparing an inventory etc.The question of premiums etc is dealt with under s.82 83 and 86 to 90 of The Rent (Scotland) Act 1984 (as amended ) and s27 of The Housing (Scotland )Act 1988.

Problem solved you may think except, most letting agents still try to charge prospective tenants some kind of fee dressed up in a selection of weasily words making sure however to avoid using the word 'premium'

But it's still illegal.How do they get away with it ? 99.9% of prospective tenants do not know the law and the proscution authorities would only do something if a particular case were brought to their attention.You can bet your life that a letting agent if challenged would would have given the premium back well before the tenant had decided to report them.But cases of tenants making a fuss are so rare that we must assume that letting agents have decided to keep taking the money on the basis that the chances of getting caught are slim

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Mombers

Dec 21, 2011 at 16:05

Come on, this is a property owning democracy. People who don't own property don't count.

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Anonymous 2 needed this 'off the record'

Aug 16, 2012 at 16:32

http://38degrees.uservoice.com/forums/78585-campaign-suggestions/suggestions/3082048-tenant-s-rights

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