Letting agent Foxtons is facing an £80m “class action” over letting agent fees which could see the company forced to pay back hundreds of pounds to current and former tenants.
The case, launched by the social entrepreneurial firm CaseHub, claims that Foxtons’ fees could be illegal under the Unfair Terms in Consumer Contracts Regulations 1999, and its successor the 2015 Consumer Rights Act. CaseHub’s founder, Michael Green, claims that “service charges” such as £420 for administration, £300 for name changes and £165 for checking out a property are vastly inflated. Green states that fees for such services should instead range between £10-£55.
The Foxtons’ case comes at a time when the issue of letting agent fees and regulation has attracted increasing Parliamentary attention. In May the Conservative MP for Lewes, Maria Caulfield, secured an Adjournment Debate in the House of Commons to discuss the Government’s actions in relation to letting agent fee capping.
Miss Caulfield reported research from Seaford and Lewes Citizen’s Advice Bureau which found that letting agent fees can range from £175 to £922. This is in addition to an average of a six-week rent deposit. During the debate Conservative MP Kevin Hollinrake, co-founder of Hunters Estate Agents, argued against fee capping. Hollinrake claimed that agents may choose to decline tenancies to prospective tenants with inferior credit histories or increase rents should fees were scrapped.
Green states that the proposed class action against Foxtons is about extravagant, gratuitous and hidden fees. These include overcharging, double charging landlords and tenants and introducing fees at the last minute.
Foxtons dismisses the claim, saying its fees are “open and transparent” and that tenants have full visibility of charges before renting a property.
Britain’s biggest landlord Fergus Wilson and his wife Judith Wilson have been caught up in the rout of the British Housing sector following Britain’s decision to leave the European Union last Thursday.
The Wilsons who aggressively built a property portfolio since the early nineties, have been trying to sell their £250 million property portfolio of around 900 houses to a collection of foreign buyers and wealthy individuals. However, the Daily Telegraph claimed that Mr Wilson is seeing the cancellation of many sales following Thursday’s Brexit vote.
The Wilsons are perhaps models for Britain’s buy-to-let frenzy and are no strangers to controversy. In 2009, Judith Wilson saw a court case thrown out by a judge for demanding £3,000 for a new bathroom suite from a tenant who had damaged a cistern lid which the tenant offered to replace. In a written judgment, Judge Christopher Cagney branded the claim “exaggerated”, and said he “had doubts” that work to replace the bathroom suite would ever be carried out. Mr Wilson was also found guilty in 2014 of assaulting an estate agent when a boiler in one of his properties failed to work despite a court plea that he was “too fat to hit anyone”. Earlier in January of that year Wilson sent eviction notices to every tenant that received housing benefit saying he had lost around £800,000 because of them.
Undeterred by the market turmoil caused by the Brexit vote, Mr Wilson claims that buy-to-let investors will become richer as Britain leaves the European Union because tighter immigration policies proposed by Boris Johnson and Michael Gove are “likely to improve the quality of tenants.”
According to Mr Wilson: “Ten years ago I housed a lot of single mums and battered wives who were a good category of tenant. They were pretty good at paying the money and looking after the houses. But then in about 2005 the eastern Europeans started coming and they made really good tenants. I haven’t advertised a property for five years because they always ask – can my friend move in?”
Despite the Wilson’s optimism, the housing sector was one of the worst affected industries following Britain’s decision to reject EU membership with shares in housing giants Taylor Wimpey, Redrow and Bovis Homes Group each down around 30% since the vote.
Landlords in the UK may soon find it easier to track renters’s private social media content using software developed by a UK startup. The company, Score Assured, uses a program to scan prospective tenants’ social media profiles and private posts to record information such as relationship and family status. Also recorded are key words such as “no money,” “poor” and “staying in” which the company claims may indicate how reliable a tenant may be in maintaining rent payments.
The company’s co-founder, Steve Thornhill, has rejected claims that the program breaches privacy laws saying that the software is more innocent than it appears. “It’s about giving the tenant more opportunity to get the property they want,” he says. “A lot of people now, millennials, for example, don’t have credit scores — so how they can get a property when the answer from the traditional credit score is going to be no?”
Supporters of the program claim that a tenant must consent to a landlord running the program on their social media profiles before it can be used. Thornhill claims that such consent means that the program, Tenant Assured, is no different from a traditional credit check.
Others say that often tenants have no other option than to accept the download of their social media information to secure a property and hence tenants will be forced to accept an invasion of their privacy. Also consumer protection laws regulate credit checks because of their potentially large impact on consumers. Regulators also have recognized that although such checks may technically be “opt in,” they’re effectively not optional for those who don’t have the luxury of only choosing landlords, jobs or loans that don’t require them, or who work in industries or live in areas where such checks are standard practice.
A Renters’ Rights Bill was given a second reading in the House of Lords Yesterday. Under the proposals presented as a Private Member’s Bill by the Liberal Democrat Baroness Grender, local authorities would be required to give tenants access to a database of rogue landlords and property agents. Also included are proposed amendments to the Landlord and Tenants Act 1985 which would abolish a large number of letting agency fees currently paid by a large number of renters in England such as: These include:
inventory check fees
reference check fees
tenancy extension or renewal fee
The Baroness also proposes that persons deemed suitable for inclusion on a database of rogue landlords would preclude one the right of obtaining a HMO (House of Multiple Occupation) license.
Baroness Grender claims that the short-term nature of many modern tenancy agreements, with around one in four renters moving home in 2013-14 makes the abolition of agency fees significant. The Baroness claims that in London, the median anount that a renter must pay before moving is £1,500 with some renters forced to use loans or cut down on food and heating to cover up-front moving costs.
Contributing to the debate was the Conservative Viscount of Younger who commended Baroness Grender for introducing the Bill but expressed the Government’s reservations about the bill. The Viscount claimed that the banning of letting agent fees would not make renting any cheaper for tenants and Tenants would still end up paying through higher rents.
Aside for reservations however due to the the definitions of rogue landlords and letting agents and the best manner of regulating letting agent fees, the Bill enjoyed broad support and is scheduled to be considered by a House of Lords committee later in the year.
Cherie Blair has spoken at an event organized by Landlord and letting agent groups seeking to overturn Chancellor George Osborne’s planned changes to mortgage interest relief for landlords. The Chancellor’s proposals, introduced in the 2015 Budget and Autumn statements, are intended to eliminate tax exemptions which the Treasury claims are not enjoyed by investors in other asset classes such as shares. Under the proposals, landlords operating as sole traders will be less able to deduct mortgage interest payments when calculating their tax liabilities.
Mrs Blair spoke at the event as council to a legal challenge brought against the Treasury proposals following the failure of a formal Parliamentary petition. The motion started by the Residential Landlord’s Association fell more than thirty-one thousand signatures short of the required hundred thousand to merit debate in Parliament. The failure to exert pressure on the Government using petitions led to a crowdfunding campaign by landlords to finance a legal challenge to overturn the Chancellor’s measures.
Acting as legal council to the complainants through Omnia Strategy, the law firm she founded and chaired, Mrs Blair claims that the Chancellor’s proposed changes warrant a judicial review since they discriminate against landlords according to the European Convention on Human rights. This gives one the right to hold one’s property in a way without unfair taxation. Mrs Blair also purports that the tax changes go against European Union competition laws by favoring large institutions over small individual investors.
Also speaking at the event was the Conservative Life Peer and former member of Parliament Lord Howard Flight who had written a letter to the Government “Why the Government is wrong to attack Buy-to-Let.”
The conference, titled the “Tenant Tax Summit” was held on 9th June at the ILEC Conference Center in Earl’s Court. Sponsorship was provided by various property investors and landlord’s organizations including Platinum Property Partners, Velvoir, the Humber Landlord’s Association and the Residential Landlord’s Association among others.
The private rental sector in England has the highest proportion of poor property standards of any tenure type according to a research published in Parliament. This finding follows the 2014/15 English Housing Survey which found that 29% of private rented properties would fail the Government’s decent homes standard for social housing, compared to 14% of social housing.
Despite numerous regulations in the private letting sector which govern repairs and maintenance requirements such as the Housing Health and Safety Rating System, a risk-assessment based regulatory model introduced in 2006, there are effectively no minimum property standards for rented housing in England.
The parliamentary report on the state of housing in England follows recent failed attempts to establish minimum housing criteria such as a Private Member’s Bill proposed by Karen Buck, the member of Parliament for Westminster North.
The proposed Fitness for Human Habitation Bill sought to amend the Landlord and Tenant Act 1985 to require that residential rented accommodation be provided and maintained in a state of fitness for human habitation, was adjourned on its second reading debate on 16th October 2015.
The Conservative MP for Lewes, Maria Caulfield, secured an Adjournment Debate in the House of Commons to discuss the Government’s actions in relation to letting agent fee capping.
Miss Caulfield reported that research from Seaford and Lewes Citizen’s Advice Bureaux which found that letting agent fees can range from £175 to £922 in addition to an average of a six-week rent deposit.
Also participating in the debate was Kevin Hollinrake, co-founder of Hunters Estate Agents and the Conservative MP for Thirsk and Malton who added that agents may choose to decline tenancies to prospective tenants with inferior credit histories if fees were scrapped rather than capped.
The Conservative MP for Thirsk and Malton, Kevin Hollinrake also contributed to the debate adding that letting agents rely on fees for their income, which would probably be obtained from higher rents or landlord’s costs if such fees were prohibited.
Letting agent fees are attracting increasing political attention as the housing crisis deepens with reports of many letting agents insisting on six month rotating tenancy agreements against the wishes of many landlords or tenants in order to charge additional contract renewal fees.
Almost half of 25-34 year-olds in England now rent according to a recent House of Commons research report. The briefing assessing Government initiatives to extend home ownership claims that 48 per cent of the 25-34 year old age group now rent their homes up from 21 per cent in 2003-04. However, given the choice, the report states that 86 per cent of this age category would prefer to own their own homes rather than rent.
The housing crisis is particularly acute in London. According to Alan Holmans of the Cambridge Center for Housing and Planning, the house-price-differential between London and the rest of the UK has climbed to a post-war peak and is currently 85 per cent higher than the UK average. However, the differential between average London household incomes and the rest of the United Kingdom, is only around 32 per cent higher.
The scale of the housing crisis has lead to a series of proposals in recent years including Chancellor George Osborne’s announcement of a “Five Point Plan to increase home ownership” in his 2015 Autumn Statement and Spending Review. This included a commitment to build 400,000 affordable houses by 2020-21 among other measures. This was soon followed by the launch of the “Help to Buy London” scheme in February 2016 in recognition of higher housing costs in the capital.
The effect of buy-to-let landlords was also highlighted by the Chancellor as a potential exacerbating factor in house price inflation. Accordingly in his Summer 2015 Budget, the chancellor announced plans to restrict tax relief on landlords’ mortgage costs. This decision is currently being challenged by landlord’s organizations which have hired to the legal firm Omina Strategy, which was founded and chaired by Cherie Blair.
Moreover, in order not to penalize buy-to-let landlords with mortgages against those who buy additional properties in cash through restrictions in mortgage interest rate relief, the Chancellor also announced that a 3% increase in stamp duty which will be levied against purchases of additional properties. The Chancellor argued that the buy to let sector had had a disproportionate impact on the housing market as a whole, and that many buyers had not been affected by earlier tax changes, announced in the 2015 Summer Budget.
The Government considers current regulation of private sector letting and managing agents adequate according to a recently published House of Commons Research note.
According to the briefing there is “no overarching statutory regulation of private sector letting or managing agents in England or any legal requirement for them to belong to a trade association, although many letting and managing agents submit to voluntary regulation” despite the rapid growth in the private rental sector over the past two decades.
Furthermore, the Government plans to improve the quality of the rental sector by increasing the range of powers available under consumer protection legislation and has no intention of introducing regulation.
The Government does not intend to introduce regulation in the sector and has pointed instead to the existing range of available powers under consumer protection legislation. However, an amendment to the Enterprise and Regulatory Reform Act 2013 enabled the Government to require agents to sign up to a redress.
This comes as private motions in Parliament have been heard recently in relation to regulating letting agent fees which one Conservative MP described as “an opportunity to fleece tenants”.
The research note states that the Government considers that the present legal framework strikes the right balance between landlords and tenants and that new regulations would “introduce too much additional red tape”.
Two landlords at the center of a legal challenge to Chancellor George Osborne’s tax changes announced in last year’s budget have confirmed that two government departments had provided an “acknowledgement of service”.
The legal challenge to the Treasury’s tax changes was launched by two landlords, Steve Bolton and Chris Cooper, who used a crowdfunding platform to raise sufficient capital to employ Omnia Strategy, a legal firm founded and chaired by Cherie Blair, to seek a judicial review of the Chancellor’s measures.
The legal battle over the Chancellor’s proposed changes to Mortgage Interest Relief follows the failure of a Petition launched by the Residential Landlord’s Association to attract sufficient support to warrant debate in Parliament.