Letting agents: how to protect yourself from 'cowboys'

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The rental arm of the property market has been compared to the 'Wild West' by the Royal Institution of Chartered Surveyors (RICS).

Due to high house prices and difficulty accessing mortgage finance, more people are choosing to rent than they used to.

Increasing numbers of tenants have made the less savoury face of the letting industry more apparent.

"More than half a million people this year will experience a letting agent," explains property expert Henry Pryor.

"Whilst the number of rogue agents is thankfully small, redress for those who need it is currently not easy.

"Unlike estate agents who buy and sell properties, letting agents are less regulated and are not governed by the 1979 Estate Agent Act."

Letting agents and tenants

  • One in five tenants feel dissatisfied with their agent
  • Only 60% of agents are signed up to a professional body or redress scheme
  • The letting agent represents the landlord but 43% of tenants think they represent both sides
  • 62% of tenants don't know whether or not their agent was a member of a professional body

The government has recently tightened the regulation on letting agents.

However, the opposition and industry organisations argue that more fundamental changes are needed.

So, it looks like the Wild West is without a sheriff for a little while longer.

Until further changes are made to the law, consumers will have to keep their wits about them to avoid being ripped off by rogue agents.

Fortunately, there are some steps you can follow to protect yourself and your hard earned cash:

Make sure the letting agent belongs to a recognised professional body

The first thing to check before using a letting agent is whether they belong to a professional organisation such as the Property Ombudsman, National Approved Letting Scheme or Association of Residential Letting Agents.

"Anyone can set themselves up as a letting agent, even someone who has been banned from practising as an estate agent," says Henry Pryor.

"A qualified letting agent who is part of a professional body will have minimum standards of membership and will require their members to keep up to date with changes to legislation and best practice."

Many rogue agents may display the logos of these organisations on their websites, or even claim to be members when they are not. You can check whether they really are a member on the relevant organisation's website.

Use a letting agent who has signed up to a redress scheme

At present, letting agents are not obliged to sign up to a redress scheme but under plans announced by housing minister Mark Prisk this will change during 2013.

The redress scheme gives a clear route for tenants and landlords to pursue complaints with a third party if they don't get the service they expect from a letting agent.

There are two schemes at present: the Surveyors Ombudsman Scheme and the Property Ombudsman.

Under the new regulations, failure to join a scheme according to the Office of Fair Trading guide could result in civil and/or criminal penalties for agents.

If a complaint is upheld, the agent may be required to apologise and/or pay compensation to the tenant or landlord of up to £25,000.

A serious breach of legislation or code of practice could lead to the agent being dismissed from the approved redress scheme.

As it will be a legal requirement for agents to belong to such a scheme, they will no longer be able to trade as a letting agent.

Make sure your payments are protected

You may be at risk if you use a letting agent who is not part of a client money protection scheme.

"Any lease that started after 6 April 2007 requires the landlord to place the tenants' deposit in one of five authorised schemes," says Henry Pryor.

"Ensure you get confirmation that this has been done from the scheme concerned."

To make sure your money is not misused by an agent and that your deposit is protected, check whether your letting agent is a member of Safe Agent.

Look for the SAFE mark on agents' websites. This ensures that they protect landlords' and tenants' money through client money protection schemes.

Never hand over a deposit to 'guarantee' a property

Some letting agents have been known to take payments from potential tenants to guarantee that the property is theirs but then keep it on the market so they can collect similar payments from others.

Henry Pryor suggests that it is best to be organised to avoid this.

"Spend time making sure that you have everything you need to sign up quickly when you find a suitable property," he says.

Look out for hidden charges

Don't be pressured into paying any extra fees.

Many cowboy agents do not disclose all the charges they may impose upfront. This can make it difficult to compare prices, cause great expense to you and may be in breach of consumer law.

Always ask about any additional charges and check the small print before you sign anything. The landlord pays the agent for the administration so you should not be paying this.

A month's rent as a deposit and a fee for credit/reference checks of about £90 to get the contract and applications processed is normal.

Alarm bells should be ringing if the agent asks you for an additional holding charge on top of the deposit, charges you to view a property or tries to charge you for cleaning or decorating the property before you move in.

Question any additional payment and under no circumstances pay to view a property or for any work to be done on it.

Look for testimonials

Check online to see if other people have had a problem with the agent you are using.

Although online testimonials will not always be accurate, and can be manipulated by the agent, it should be fairly easy to find red flags on agents that have ripped off a large number of people.

You can check a number of independent websites such as Meet My Agent, All Agents or UK Letting Agents Directory as well as the agents' websites themselves for testimonials.

You can also do an internet search for the agent and see if any bad reviews come up.

If you are in any doubt get advice from a lawyer or Citizens Advice before you sign something you are unsure about.

Citizens Advice has a helpful summary for landlords and tenants on its website.

This material is for general information only and does not constitute legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.

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