For the growing number of tenants in the private rental sector, it is not difficult to believe that they are the lowest of the low. You can’t buy a home of your own because property is simply too expensive, and your rent makes it impossible to save. Landlords have the capital to afford to buy properties, and then rent you the property you were priced out of buying in the first place.
The demand for rental property is soaring, and, even if you do secure a flat, or room in a shared house, you have to live in a state of uncertainty, knowing that you could be given a couple of months’ notice to start the whole process again.
The political class and the media ignore you, because they are obsessed with home-ownership at the expense of providing decent homes for all, and tenants’ rights are very low down the list of housing priorities.
And this obsession with ‘market-based solutions’ meant that even recommendations about regulating letting agents from the somewhat timid Rugg report, were not implemented. Renters are and remain second class citizens. Former housing minister Grant Shapps demonstrated the complacency of the government when he said, ‘With the vast majority of England’s three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords.’ Apart from questioning his grip on reality, we must remember, alas, that Labour had 13 years in which it could have made the housing market fairer, but failed to do anything until too late.
Former housing minister John Healey has put a bill before parliament to stop the scandal of rip-off fees in the private rented sector. And a Labour analysis of 91 letting agencies in England found that tenants have to pay an average of £902 in upfront charges, including deposits, administration fees and the cost of checks on references and creditworthiness. In London, new tenants have to find more than £1,700. When rent is included, the average up-front charges imposed on tenants increases to £1,626.
One of the biggest scandals relates to holding deposits. The idea behind them is to eliminate the behaviour of prospective tenants who commit to taking on a property, but then don’t proceed. Letting agents claim that there are administrative expenses incurred in taking the process as far as they have done.
There are no strict laws governing the charging of fees when setting up a tenancy in England and Wales, although in Scotland it is illegal for landlords or agents to charge what are called ‘premiums’. Premiums are defined as any money which has to be paid additional to the rent in order to secure a property.
Holding deposits are possibly the most outrageous fees of all. They are totally one-sided. A tenant will lose money if they decide not to take a property, but the landlord does not lose any money if they decide not to accept the tenant’s offer. In real life, tenancies do not proceed for a variety of reasons. Renters may withdraw their application because they have had a change of heart. They may be rejected by the referencing company, or fail to meet other criteria set by the landlord or letting agent. But if they have paid a holding deposit, the chances are that they will lose the money.
Landlords can, and often do, use a number of different letting agents to market a property, which means, of course, that a holding deposit cannot actually reserve a property for the prospective tenant. Even if the agent concerned stops marketing the property, they cannot stop rival agents from doing so. In other words, a prospective tenant receives no guarantees and no service for the money they have paid.
And the vast majority of holding deposit receipts will not include all of the core terms necessary to any letting agreement, such as a moving-in date. So a prospective landlord can keep the prospective tenant waiting for an unreasonable length of time. If the prospective tenant can no longer afford to wait and withdraws their offer, they often lose the deposit.
Even worse, if an offer is not accepted because credit-referencing checks fail or the prospective tenant is unable to provide financial guarantors, then most letting agents would consider that they are entitled to keep either some or all of the holding deposit. They would be wrong.
Readers may think that this makes the holding deposit essentially meaningless, since it offers no legal guarantee of a right to take up the tenancy on a property. That is absolutely correct.
Labour must promise to end the rental rip-off. And we can signal the way forward by campaigning to outlaw holding deposits now.
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Rob Williams works in public affairs and as a journalist
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