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.
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.
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.
The private rented sector in London has grown from 17% of all homes to 26% over the last decade according to a London Housing Committee
However despite the rapid growth in private renting in the capital, the rules governing the sector remain largely unchanged since the 1980s. According to the report which represents the view of the majority of the London housing commitee, the Mayor of London should:
Stimulate the build to let sector by getting government help for landlords competing to develop land;
Set up a London-wide register of landlords to help the boroughs enforce existing legislation and better protect tenants; and
Support London’s low-income renters by lobbying government to review the freeze imposed on Local Housing Allowance levels in London until 2020.
In addition to its consumer protection role, the National Renters Alliance is always open to ideas to present to government. If you have any suggestions to better protect and improve the situation of renting in London and across the rest of the United Kingdom please send us our thoughts.
60% of renters in London live in unacceptable conditions according to a survey carried out by YouGov and the housing charity Shelter.
The survey of 739 private renters in London between 13th June and 22nd July 2015 found that around 60%, equivalent to around 1.5 million Londoners, have experienced problems in the past year. According to the survey with vermin and damp commonly reported problems were found to be:
Damp or mould (39% of renters)
Poor insulation or excess cold (26%)
Animal infestations such as mice and cockroaches (25%)
Problems with a leaking roof or windows (18%).
In addition to poor disrepair, a significant fraction of renters had experienced unsafe conditions with 14% reporting electrical problems and 15% living in homes which are poorly secured. Most worrying were the 3% of renters who reported gas leaks. According to the English Housing Survey 2013/14, 16.5 per cent of private rented homes fail the Government’s minimum standard under the Housing Health and Safety Rating System.
The poor state of rental housing stock in the capital stands in stark contrast the the cost of rented accommodation with the average London renter paying just under 60% of their income on rent.
The seriousness of the rental crisis in the capital and across the country as a whole has led renters rights groups to campaign for the introduction of greater council powers to address disrepair in the private rental sector.
Other proposed initiatives include the establishment of landlord licensing to better protect renters from rogue landlords and letting agents. Landlord and property licencing is currently mandatory for large HMOs (homes in multiple occupation) although there are calls to extend this regime to all HMOs irrespective of size and to other private rented accommodation.
The lack of resources available to local authorities to deal with housing disrepair in the private letting sector was exposed yesterday in the House of Lords.
According to the Liberal Democrat Baroness Bakewell, housing complaints totaled 62,818 in 2012-13 which resulted in only 31,634 inspections by local authorities. Astoundingly, only 1,645 improvement notices were served over the same period. The most common categories of hazards and faults identified in inspections were: damp and mould, excess cold, crowding and space, falling hazards and fire. The powerlessness of many renters is exacerbated by out-of-date legislation whereby tenants can take action themselves only if their rent is less than £80 a year in London and £52 a year elsewhere.
These findings come as 11 million people now live in private rented accommodation in England, a figure which has almost doubled in the last decade and is set for further increases.
The Baroness claims that Parliamentary research indicated that 30% of private rented properties in England would fail the Government’s decent homes standard. This is almost double the 15% in the social rented sector. Also, despite having the lowest average property standards, the private rental sector is the most expensive housing option. Private renters now spend an average of 47% of their income on rent compared with 23% of the income of people with a mortgage and 32% of the income for those in the social rented sector.
The Baroness’ comments were made during a committee reading of the Housing and Planning Bill which would establish a database of rogue landlords and letting agents and strengthen the enforcement of pre-existing legislation in the private rental sector among other measures.
Karen Buck, the Member of Parliament for Westminster North has announced that only 14,000 of a total of 51,316 complaints made to councils about poor housing were subjected to a local authority environmental health assessment in 2014. Ms Buck, has also claimed that on average councils prosecuted only one rogue landlord each year.
The figures were presented in a debate about standards in the Private Rented Sector on February 6th during which Ms Buck asked whether the statistics provided irrefutable evident that local authorities lack the resources to investigate cases of housing disrepair.
On being asked what measured the Government proposes to adopt to tackle rogue landlords, the Government’s Minister for Housing and Planning, Brandon Lewis, claimed that enabling councils to issue civil penalties amounting to up to £30,000 and remedy payment orders for up to 12 months proposed under the Housing and Planning Bill would give councils extra resources to improve housing conditions.
Also participating in the debate was the Labour Member for Hampstead and Kilburn, Tulip Siddiqm who claimed that many of his constituents who rent privately have reported being the victim of revenge evictions despite the banning of retaliatory eviction in 2015.