Can an Agent Charge a Tenant for Finding a Flat?

Pimlico Flats

Pimlico Flats

The answer is that theory and practice vary. This is an age old question, especially in London where Flats are harder to find, and there have long been agencies who offer Landlords free advertising and charge the tenant (the oldest and best known “Flatland” has been trading on this model since 1971). Indeed before this website came into being Pimlico Flats used to rent through Flatland and 2 other of these agencies.

In theory according to The Accommodation Agencies Act 1953 an agent is not allowed to charge the tenant. The Act was originally passed as a short-term measure, however, after a series of annual renewals, it was made permanent by the Expiring Laws Act 1969. Although the legislation was introduced nearly 60 years ago, it can still be enforced and Flatland itself was successfully prosecuted by Westminster City Council in the 1990s. The Act was introduced to prevent agencies taking fees in advance from prospective tenants in return for details of properties, and Agents cannot charge prospective tenants for lists, addresses or details of properties that they have in their possession, and the Act is quite clear in this respect.

As a general rule, the agent is at liberty to act either for a landlord or for a tenant (and accordingly to charge the appropriate commission).  The only restriction placed upon the agent by the general law is not to act for both.  Thus relocation agents may charge tenants for finding specific accommodation which includes advertising their individual requirements. Where an agent takes a deposit or fee, refundable on demand, where the deposit is not in respect of any particular property, an offence is committed. Where an agent asked clients to sign an agreement under which a fee would become payable if and when they took accommodation found for them by the agent, the payments related to the finding of suitable accommodation and not for the supplying of an address, and no offence is committed. An amount chargeable at any time before the prospective tenant finds acceptable accommodation is an illegal payment, even if deemed returnable in the event  of the prospective tenant not finding accommodation.  Yet, an agent may legitimately charge for finding accommodation for a tenant who actually takes it, but may not demand a fee (even a returnable deposit) for merely supplying him with the address in the first place.

In practice Agents seem to find it fairly easy to charge fees without contravening the Act, or else the authorities find it too onerous to enforce the law. Agents also make money by charging for services – a local Pimlico Letting Agent made the following equivalent charges in 2010:

  • Administration £350
  • Referencing £52
  • Agreement £188
  • Inventory charges depending on the Flat & can vary from £80 – £300 per inspection. The tenant pays the Check In fee, the Landlord the Check Out fee.

The charges are subject to VAT. In theory the charges should reflect the actual costs to the Agent, however there are several online Agencies who offer Landlords free advertising, and they clearly only operate if they are making a profit from the charges to the tenant. They are clearly contravening the principle that the agent should only act for either the landlord or the tenant, but as with “Key Money” the authorities clearly don’t have the motivation to address what has become a custom & practice flouting of the law.

When You Rent a Flat You Don’t Need a Handyman

Monument to David Berry, a good landlord of wh...

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I was reading an article from The Accidental Landlord on the same day that I got a text, e-mail, and phone call from a tenant about a problem (admittedly a very serious one – a leak). In our case we had fixed the problem by 11:00 on the morning that it was reported, and I just wondered whether our tenant appreciated how lucky they are? Because we are a professional landlord maintaining flats day in and day out we have a permanent relationship with tradesmen who know what they are doing, and who will come to fix the inevitable problems that all flats face.

If you are a tenant of Pimlico Flats, you speak to George in reception on your way to work, and when you come home the problem has disappeared. The Accidental Landlord says:

  • £24.95 per hours, no call-out fee. Chap was on time (always a bonus) and he gave a quote to replace a bedroom door. He returned the following week with the door and carried out the work for an agreed fee of £144, which included the cost of the door plus labour. I think it took him more than 5 hours, but he only charged me the 4 hours agreed at the outset. 10/10
  • £20 per half hour (+VAT) + £20 call-out fee. More at evenings and weekends. A little yellow man turned up on a little yellow scooter, on time, and he worked swiftly through a list of tasks but he didn’t have the expertise to carry out all of the repairs, which was disappointing as I’d been told on the phone that he would. Jobs left undone were a slow-running tap and a faulty Yale lock. 7/10
  • £40 for the first hour then £15 per half hour (+VAT). No call-out fee. Man arrived an hour late (grrr), didn’t call to let me know (grrr again). Once he was there it took him only a few minutes to erect at shower riser rail, for which I would have had to pay £47, but he agreed to carry out some other little DIY jobs such as glueing down some loose laminate etc. 6/10
  • £20 per hour half plus £20 call-out (+VAT) Mr Grumpy was on time but that’s where the good news ends. He put up 3 roller blinds. The first one was wonky and I think he hoped I wouldn’t notice there was a gap of a few inches on one side. He managed to get grubby finger prints over it too. Oh, and he broke a lamp. He did deduct £10 from his fee for the lamp, but still…..5/10

Rent London Flats from Pimlico Flats and Appreciate the Service

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How much would a London Lettings Agent be Worth?

It looks like a London Lettings Agent would be worth well over a million pounds judging by today’s announcement of a buyout of the Leaders chain of 42 Letting Agents, based in SE England. The existing business has been bought for £35M with a further £12M earmarked for expansion.

Lettings Agents are seen as so valuable because while the house buying sector may be suffering in the economic downturn, the residential lettings market is booming – worth £2.5bn, growing at 9pc a year, across the UK about 12pc of properties are privately rented, but this rises to 17pc in London and the South East, where Leaders operates. Since 2005, the company has bought and integrated 31 Lettings Agents, with revenues growing at 28 per cent per year to their current level of approximately £25m. The rental proportion of the property market is expected to increase dramatically due to the housing shortage and decreasing affordability. Young people are also increasingly opting to rent as a lifestyle choice.

Nevertheless the high valuation of Lettings Agencies contrasts dramatically with reports of the death of the traditional Estate Agent. New kids on the block (iSold, Tepilo, Google, iTurnip – to name just four recently mentioned in the press) offering internet marketing of properties directly to the vendor without the use of an agent, have been taken widely to herald the end of the High Street Estate Agent, and most Estate Agents are also Letting Agents. Is there a contradiction in the two trends?

An Estate Agent is principally a salesman selling a product (a flat), they have no influence over the flat, or even it’s presentation – can you imagine an Estate Agent saying “I have to redecorate your hall before I can sell your flat”? In contrast a Letting Agent is often responsible for the management of the property and it’s tenant on an ongoing basis. The Estate Agent is most likely to be representing a resident Vendor, the Letting Agent is very often acting on behalf of a remote Landlord.

These are the reasons why the Estate Agent of the future may disappear into a website hosted in India, whilst a new breed of Letting Agents are renting their old offices, and presenting flats to a high street near you.

High Street Letting Agent

High Street Letting Agent

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