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.