The report, from the Communities and Local Government Committee, also wants the Office of Fair Trading to have the power to ban letting agents who act improperly and new rules to ensure the safe treatment of landlords’ and tenants’ money.
‘Amazingly letting agents are subject to less control than estate agents. This lack of regulation is giving rise to sharp practice and abuse by some letting agents. We were told that the letting sector was the property industry’s Wild West. Cowboy’ agents who rip off landlords and tenants have to be stopped. They need to play by new rules or get out of the sector,’ said Clive Betts MP and chair of the Committee.
The report also demands action to crack down on hidden and unreasonable fees and charges imposed by letting agents. It says agents should be required to tell tenants about fees before they start the letting process. The Committee calls for all property listings and advertisements to list in full the fees a tenant would have to pay.
‘Unreasonable fees and opaque charges are not confined to a few rogue agents. Many well known high street agents are just as guilty. Agents must make tenants aware from the outset of the fees they intend to charge. All property listings¬ on websites, in print or in agents’ windows must be accompanied by a full breakdown of fees,’ added Betts.
The Committee found that, while the private rented sector has grown significantly in the past decade, the market is still relatively immature. It does not yet offer many renters what they are looking for. With the sector home to an increasing number of families, the Committee calls for barriers to longer tenancies to be removed. In return for offering longer tenancies, landlords should be able to evict tenants much more quickly when they fail to pay their rent.
‘Too often, the security desired by many families is not available within the private rented sector. We heard from one father whose 10 year old daughter had already had to move home seven times in her life,’ said Betts.
‘We have to overcome the barriers to longer tenancies. Letting agents should not be chasing renewal fees. Instead they should be working to ensure the length of tenancies meets the needs of both tenants and landlords. In addition, mortgage lenders should remove conditions that limit tenancies to one year,’ he explained.
The report also says that tenants and landlords are often unaware of their rights and responsibilities. The Committee calls for the legislation covering the private rented sector to be consolidated and made easier to understand. After this, there should be a publicity campaign to promote awareness of tenants’ and landlords’ rights and responsibilities.
As part of this review, the report recommends that the government work with groups representing tenants, landlords and agents to bring forward a standard, plain language tenancy agreement on which all agreements should be based. Included within this standard agreement should be an easy to read fact sheet, setting out the key rights and responsibilities of the landlord and the tenant.
‘I want to see renting as an attractive alternative to owner occupation. The market has to better meet the needs of renters. Tenants and landlords need to be much better informed about their rights and responsibilities. Bad landlords should be driven out of the sector,’ Betts said at the launch of the report.
‘The legislation governing the private rented sector has evolved over many years and often in response to specific problems at a particular point in time. Far from providing clarity, the result is a bewildering regulatory framework. It should be simplified and all parties made aware of their rights and responsibilities,’ he pointed out.
The Committee also raises concerns about the physical standard of private rented property. It calls for local authorities to be given the ability to recoup housing benefit payments when a landlord is convicted of letting property below legal standards. Similarly, tenants should be able to reclaim rent paid from their own resources if their landlord is convicted.
The Report recommends that local authorities be given more freedom and flexibility to raise standards. Centrally imposed bureaucracy and constraints on licensing schemes and enforcement should be reduced. Councils should also have the power to require landlords to be part of a recognised accreditation scheme.
Richard Lloyd, executive director of consumer group Which? called for the recommendations to be acted upon as soon as possible. ‘We've been calling for lettings agents to come under the same regulations as estate agents since we uncovered an alarming lack of consumer protection and wide scale poor practice in this market,’ he said.
‘We also want the Office of Fair Trading to crackdown on hidden charges so that people know what they are signing up to and can more easily shop around,’ he said, adding that Which? believes fees should be explicitly set out in all property adverts, on websites or at the first point of contact with an agent.
‘While we are pleased the Enterprise and Regulatory Reform Act 2013, to be implemented in 2014, is going to give landlords and tenants access to a complaints scheme, we also want to see the OFT have the powers to ban or reprimand letting agents in the same way they can estate agents, and agents required to follow a code of conduct,’ explained Lloyd.
Richard Lambert, chief executive officer of the National Landlords Association (NLA) said that the report takes the debate around the growth of the private-rented sector out of the 1970s into the 21st century.
‘Landlords must respond to the changing needs and demands of renters. The current tenancy legislation is more flexible than many realise, but the Committee is right to highlight that adapting from the accepted norms to use this flexibility will be a challenge requiring a cultural change and removal of barriers, real and perceived,’ explained Lambert.
‘The NLA endorses the call for better, simpler regulation and for more proactive enforcement from local authorities which targets those who fail to meet acceptable standards. It also supports the Committee’s recommendations for a more comprehensive regulatory framework for letting agents, and we are pleased that its proposals reflect our argument that the requirements should mirror those already put in place by many agent representative bodies, such as UKALA,’ he said.
‘Overall, the Committee has brought forward a package of conclusions, recommendations and proposals which offer a fair balance to all and provide the opportunity for the industry at large to take the initiative,’ he added.
The National Union of Students (NUS)also welcomed a report and pointed out that students, often renting for the first time, can be the victims of unscrupulous letting agents and would be a major beneficiary should the government take the proposals forward.
‘Substandard letting agents have been able to get away with overcharging and shoddy practice for far too long and it is imperative that the government quickly take forward these proposals,’ said Colum McGuire, NUS vice president in charge of welfare.
‘Tenants should be able to expect the same standards when they rent a home as they would if they were buying. The cost of student housing is rising at an alarming rate and while standards are improving in some places with the introduction of students’ union run landlord accreditation schemes, students need to know that their agent is not ripping them off,’ he explained.
He added that it is a pity that the Select Committee did not recommended a national registration which would be able to shut down bad landlords who operate nationwide but nonetheless their proposals would be a huge leap forward for beleaguered tenants.
