OFT Report Highly Critical of Private Lettings Market

Due to the large number of complaints that have arisen in the sector, the OFT decided to take a close look in order to try to identify the issues and find ways to tackle them.

As part of the report, they analysed nearly 4,000 complaints, made by both tenants and landlords, sent to Consumer Direct regarding the lettings market from 2011. It was found that both people renting a home as well as those letting them were concerned about charges and fees levied by letting agents, poor services provided, and ‘surprise’ charges that were introduced after the contract had already been signed.

Of most concern to tenants were high and unexpected charges, confusion about holding deposits, repairs not being carried out on the property, misleading advertising, and not getting their security deposit back. Landlords main concerns regarding letting agents were agents not doing what they agreed in the contract and not passing on collected rents.

The report highlights the vastly increasing numbers of inexperienced landlords moving into the sector, not fully understanding the complexity and finer details of housing law, the knock-on effect of which is tenants not understanding their rights and obligations properly. For this reason, many landlords seek out the expertise and experience of letting agents. However, this leaves both tenant and landlord open to exploitation by unscrupulous letting agents. By being deliberately vague about their fees and services, neither tenants nor landlords are given a leg to stand on when disputes arise.

Although the report is highly critical, it stops short of calling for regulation, saying that most of the sector’s problems may be solved “through greater compliance by professionals with existing consumer protection legislation”.

The report sets out a number of recommendations for Government, industry, enforcers and others in order to make the market work better for tenants, including:

• Better compliance with legislation, particularly, better up front information. Clearer fees.
• A general redress mechanism.
• More consistency within the industry, such as what information is used for pre-tenancy checks.
• An agreed upon national strategy between Government, industry, enforcers and consumer bodies.
• Agreed enforcement strategy for traders who break the law.
• Initiatives that enable consumers to more easily assess quality, such as recognised logos.
• Working with industry and consumer bodies to develop joint educational material such as ‘quick guides’ to help tenants and landlords understand their rights.

Cavendish Elithorn, Senior Director of Goods and Consumer at the OFT, said, “Our findings shows 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.”

Despite the strong words and clear recommendations, RICs does not believe the report goes far enough. Residential director, Peter Bolton-King, said, “The OFT report adds yet another voice to those calling for changes to the lettings market.

“However, RICS remain concerned there is still no recommendation for clear, consistent and targeted regulation for all aspects of the UK residential property market.

“Such an holistic approach is long overdue, since ultimately it is about the provision of shelter, a basic human requirement.

“RICS’s own recently published research – an impact assessment of bringing lettings agents within the scope of the Estate Agents Act 1979 and introducing statutory minimum professional standards – shows there is real potential to introduce such clear, targeted regulation without generating burdens on business.

“In light of this latest OFT report, RICS urges Government to think again, and use the Enterprise and Regulatory Reform Bill to introduce such regulation – in particular, statutory redress.

“In its report, the OFT recommends increased transparency in lettings agents’ fees and charges, and working with trading standards to develop an agreed enforcement strategy. These measures are important in creating a level playing field for all residential property professionals and consumers which RICS has long sought.

“As an independent body with a royal charter which requires us to act in the public interest, RICS is ready to help with advice and guidance so consumers are aware of their rights and responsibilities in the lettings market.”

Ian Potter, managing director of ARLA, also thinks that regulation is necessary. He said, “The OFT’s report highlights some of the problems with the rental sector. Today, the sector is expanding as home ownership becomes out of reach for many. However, lack of regulation, and pressures on housing supply, mean some unscrupulous landlords and agents are able to take advantage of consumers, and are driving down the reputation and standards of the sector as a whole.

“We have long called for a central system of regulation, and would agree with a number of the OFT’s recommendations to help improve the market. In particular, agents should always be transparent about the fees they charge, and the services associated with those fees.

“In the absence of Government regulation, we would urge tenants and landlords to always consult with an agent who is a member of a recognised body like ARLA, which has a redress scheme and other consumer protection mechanisms in place.”

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