Letting agents and referencing agencies are being advised to ensure they promote consumer choice when recommending professional rent guarantor services, following the implementation of the Renters’ Rights Act.
Professional rent guarantor provision has grown in popularity as an alternative to traditional methods such as rent in advance, which were abolished under the new legislation. The service is used by tenants who can afford rent but do not meet standard referencing criteria, including students, self-employed individuals, benefit recipients and retirees.
Tenant Fees Act compliance concerns
Industry observers suggest that agencies recommending only a single service provider without offering alternatives could potentially breach the Tenant Fees Act. This could also apply where agencies decline a tenant’s chosen provider for reasons that benefit the agent rather than the renter or landlord.
According to guidance circulating in the sector, renters who require a guarantor should be offered the option of either a personal contact or a professional provider. Where professional services are needed, multiple suitable providers should be presented.
The advice comes as landlords raise asking rents following bidding ban and other regulatory changes affecting the rental sector.
Due diligence requirements
Agencies are being encouraged to conduct thorough research on service providers they recommend or accept, ensuring the level of cover aligns with landlord requirements. Some providers only cover rent liabilities for limited periods, which may not provide adequate protection.
The distinction between insurance products and professional guarantor services has also been highlighted as an area requiring clarity. Insurance is a regulated financial service, whilst professional rent guarantor services are not currently regulated, despite some products appearing to operate similarly.
Industry recommendations include providing clear, comparable information on recommended providers, being transparent about commercial arrangements such as revenue sharing or commission, and avoiding suggestions that any single provider is compulsory.
The guidance notes that agencies should prepare valid reasons for declining a tenant’s choice of service provider, rather than basing decisions solely on commercial benefit or convenience.
Market implications
The influx of rent guarantor providers since the Renters’ Rights Act was announced has created a more complex landscape for agents to navigate. The sector is expected to face increased scrutiny over time regarding alignment with regulations, potentially leading to refined standards and stricter regulatory expectations.
This development follows industry voices calling for property policy stability amid ongoing changes to the rental market framework.
RentGuarantor, which has operated since 2018 and is listed on the Alternative Investment Market, states it has partnered with over 2,200 agents and backed thousands of tenancies. The company reports that its agreements encourage partners to offer choice to tenants.
The emphasis on consumer choice reflects broader concerns about transparency and fairness in the rental sector, as agents adapt to post-Renters’ Rights Act operating conditions.
