High agent fees are discouraging tenants living in unsatisfactory housing conditions from finding alternative accommodation according to the latest report on the Private Rented Sector.
The report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees. In addition to complaints about fees, the report also found that private sector renters are less satisfied with their tenure than owner-occupiers and council housing tenants: overall 65% of private renters reported being satisfied with their current tenure compared to 98% of owner occupiers and 82% of social renters.
Important findings of the report include:
- 40% of private rented sector households were charged agency fees in 2014-2015, up from 34% in 2009-2010.
- 18% of private renters said that they felt some of the fees charged were hidden. 65% of private renters reported paying an administration fee
- 33% paid a finders’ fee, 7% of tenants paid a non-returnable holding fee, 5% paid a returnable holding fee and 4% paid an ‘other fee.’
- The number of private renters who lived in non-decent dwellings rose from 1.1 million households in 2006 to 1.2 million households in 2014.
Surprisingly, despite the entry into force of deposit protection legislation in 2007 as part of the 2004 Housing Act, the Housing Survey found that only sixty four per cent of renters with a Assured Shorthold Tenancy reported that their deposit had been protected despite penalties existing for non-compliance with deposit protection rules.
Under deposit protection legislation, landlords must place tenancy deposits in one of three government-backed deposit protection schemes within thirty days of receipt or face a penalty of between one to three times the deposit amount with the penalty value determined by the seriousness and intent of the landlord’s non-compliance deposit rules. In general greater penalties for failing to protect deposits are awarded against experienced landlords or against landlords who have attempted to avoid protecting deposits for financial gain.
Despite charging for protecting deposits being against the spirit of the deposit protection legislation the Renters Alliance has encountered numerous examples of landlords and letting agents charging renters extra fees to protect their deposits. In one landlord’s forum for example, one landlord reported charging £120 for protecting tenants’ deposits recommending to other landlords that they call similar fees “Admin fees” rather than “deposit fees” for legal reasons.
Private landlords received £9.3bn in housing benefit payments, almost double the amount a decade ago according to a study published by the National Housing Federation.
This situation is set to deteriorate with the decades long trend of decrease home ownership exemplified by a House of Commons research report published earlier this year which reported that 48 per cent of 25-34 year-olds in England now rent, up from 21 per cent in 2003-04.
The National Housing Federation report found an increase of 42% in the the number of households using housing benefit to pay rent to private landlords since 2008. Housing benefit is paid to households that cannot afford to cover rental costs in addition to essentials such as food, clothes, heating and lighting.
This situation has been exacerbated by stagnation in real middle-income household earnings with the greatest increase in housing benefit claims coming from households with net incomes between £20,000 to £28,000 per year. Furthermore, in 2008 around a quarter of private sector tenants in receipt of housing benefit were in employment, a figure which has risen to almost a half today.
In order to address the crisis in property ownership in the UK both parties have adopted standard policy positions. The Conservatives have signaled a preference for supply-side solutions to improve housing affordability with little detail on easing planning restrictions and tackling construction sector skills shortages. Labour on the other hand have suggested a combination of rent-controls and investment in social housing with few details on the practicability of such proposals.
The National Housing Federation claims that if all those housed in the private rented sector lived in affordable housing, taxpayers would save £1.5bn a year in housing benefit payments. The federation’s chief executive, David Orr has said, “It is madness to spend £9bn of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes. Housing associations want to build the homes the nation needs. By loosening restrictions on existing funding, the government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”
Since the entry into force of the Tenancy Deposit Scheme many landlords and letting agents have devised ways of evading and ignoring deposit protection rules.
One common tactic which renters should be aware of is issuing tenants with a “licence to occupy” in place of an “Assured Shorthold Tenancy”.
A licence gives the right to occupy and is typically used for bed and breakfasts, hotels, holiday lets and some HMOs. Often tenants only discover that a license has been issued when attempting to recover their deposit at the end of their occupation. However, despite being called a license, you may still have an Assured Shorthold Tenancy (AST) in the eyes of the law. In this event it may be possible to use typical AST measures to recoup moneys owed.
Do I have a License or a Tenancy?
A tenancy is created automatically if someone moves in and starts paying rent. Some landlords incorrectly issue licenses, either through inexperience or design to give tenants less rights than they would usually expect with an AST. A tenancy cannot be turned into a license merely by both parties signing a piece of paper headed ‘license agreement.’ A landmark case which defined the requirements for a tenancy as opposed to a license was Street v. Mountford in 1985. This stated that one has a tenancy if one:
- pays a rent
- occupies the property for a term
- enjoys exclusive possession of land / property
These conditions do not apply if one does not pay rent or if the occupier does not enjoy exclusive possession such as in a shared room or if cleaning and meals are provided as in a hotel.
The clearest way to identify the difference between the two [license and Assured Shorthold Tenancy] is exclusivity. If a tenant has exclusive use of at least one room in the property, and that room(s) is specified, this will usually be classed as a Tenancy Agreement. If the property is shared with more than one individual, this is more likely to be a Licence.
I believe I have been incorrectly issued with a license and my landlord has not protected my deposit, what should I do?
It may therefore be possible to claim damages from your landlord if they incorrectly issued you with a licence and failed to protect your deposit. According to current deposit protection rules, your landlord must register your deposit in one of the three government-approved deposit protection schemes within 30 days of the start of your tenancy. The penalty for non-compliance is a fine of between one and three times the deposit amount.
The National Renters Alliance has recently noticed an uptick in the incidence of the fake property rent deposit scam and is warning students and foreign nationals to be vigilant when looking for properties.
The scam which in the past gained notoriety from its association with the listings website Gumtree, works by offering to let properties in prime areas at below market rates and asking for a deposit. Extreme examples often ask prospective tenants to pay for 6 months or 1 years’ rent in advance to secure the property prior to visiting it. Payment of large sums of money in advance targets foreign nationals who are frequently required to pay 6 month’s rent in advance by established letting agents in London and student towns such as Cambridge and Oxford.
In the scam, prospective tenants are convinced to part with either credit card details, cheques or cash before seeing the property which does not exist. Further ,since the fraudsters leave no legitimate correspondence address it is almost impossible for victims to pursue fraudsters in court. Other variations include instances where fraudsters do access the property and show around prospective tenants. The property already be rented or has been rented to multiple victims at the same time.
The National Renters Alliance recommends several measures which tenants can take to help protect themselves from falling victim to this scam.
- Never pay money upfront before visiting a property. Always be suspicious if anybody refuses to let you visit the property before paying a deposit.
- Ask to see identification such as a driving license and/or passport from the prospective landlord or letting agent. If you are dealing with a company ask for a correspondence address.
- Prospective tenants can also check whether the landlord is a member of the National Landlords Association (NLA) using the NLA accreditation website www.landlords.org.uk
- If you are still a student, you can often uses your student union or accommodation office to check whether a landlord is on an approved housing list.
- If dealing with a letting agent check whether the agent is accredited by organization. Examples of such bodies include the Association of Residential Letting Agents (ARLA). the Royal Institution of Chartered Surveyors (RICS) or the National Approved Letting Scheme (NALS),
- Use commonsense. If the property looks too good to be true, too cheap for the location then it possibly is.
- Before paying a deposit ask the landlord or agent which government-backed deposit scheme is being used. Currently there are three: mydeposit, The Dispute Service (TDS), The Deposit Protection Service (TDPS).
- If the property is shared ask the current occupants how they found the property and how they pay their rent. If the landlord or agent collects only cash or regularly changes bank accounts this should warrant further vigilance.
- If possible use a credit card to pay for a deposit after the letting agreement has been signed. Be wary if you are asked to transfer money via money transfer agents such as Western Union or Money Gram. Only use these services to send money to people you already know and trust.
- Always check the legitimacy of an advert. This is especially true for a non-property website such as Gumtree, Avoid adverts with no photographs or ones with photographs used on multiple adverts.