Letting Agents

Debate between Lucy Powell and Paul Blomfield

Wednesday 27th February 2013 Westminster Hall

[Paul Blomfield (Sheffield Central) (Lab)]

I congratulate my hon. Friend the Member for Rotherham (Sarah Champion) on securing the debate and making such a comprehensive and convincing case for regulation. I am also pleased to follow the hon. Member for Folkestone and Hythe (Damian Collins), because there seems to be a cross-party consensus on the need for action and the depth of the problem, although we might not be at quite the same point in some of our conclusions.

My hon. Friend made an important point about the growing importance of the private rented sector in a housing market in crisis. She said that 3.6 million households are in the private rented sector, and by the end of the decade about 20% of households will be in that sector.

Crisis, the charity for single homeless people, has said that for many households, including those on low incomes, the private rented sector is not fit for purpose—a devastating criticism. It highlights the conduct of letting agents as a major issue among a range of problems. They charge extortionate fees—typically for reference checks on tenants, contract preparation, deposit handling and tenancy renewal—that are often disproportionate and lack clarity because they may not be charged until after the tenant has signed the contract or paid a deposit, a practice known as “drip pricing”.

Holding deposits are often required from tenants who have decided to rent a property, but it is not always clear in what circumstances and how much of the deposit will not be refunded if the tenant decides not to proceed with the tenancy. In some cases, letting agents have taken holding deposits from two or more tenants for the same property.

Crisis raises a number of other points, which make clear the depth of malpractice by letting agents. That does not apply to all letting agents, but to a significant enough number for Citizens Advice research to come up with the conclusion that 73% of tenants were dissatisfied with the service they were providing. That is a devastating figure.

My city centre constituency has many houses in multiple occupation and faces many of those problems. I am sure that many hon. Members will make points about different sectors of the community that face difficulties; I want to highlight students because I have about 32,000 of them living in my constituency.

Student accommodation has a certain image, perhaps embedded in our memories from the classic images of Neil, Rick, Vyvyan and Mike in “The Young Ones”. However, in reality, students want and deserve a decent standard of accommodation. Some students in Sheffield are fortunate if they have accommodation provided by our two universities. Students voted the Sheffield university accommodation the best in the United Kingdom—

[Lucy Powell]

Beating Manchester.

[Paul Blomfield]

Sheffield beats Manchester in many ways—[Interruption.] Not at football at the moment, but I dream on.

Most students spend some time in the private rented sector, particularly after their first year. Good quality accommodation is available in the private sector, but there are numerous cases of quality not being good enough. The student advice centre at Sheffield Hallam university student union has raised several issues of concern that students are reporting.

First, students are encouraged to sign up for tenancies early and are misled by letting agents into believing that there is a shortage of accommodation and that it is a landlords’ market, when it is not. They are encouraged to sign up for tenancies in October or November in the year prior to the start of the tenancy, which for first-year students is just after they have started their course. They are asked to make choices nine months or so before occupying the accommodation, which leads to a range of issues with disrepair because letting agents, on behalf of landlords, make promises of improvement work to secure the tenancy, but then simply do not carry out the work or, if repairs are done, they may not be done by the time the new tenants move in.

Letting agents encourage students to sign up to tenancies early because students worry about not being able to find somewhere else to live, and that often forces them into joint tenancies with people who may be first-week friends and between whom there is no lasting bond. That can cause real difficulties when people try to get out of contracts but are unable to do so. Some students sign up too early to take account of how their course is going. They may not proceed with the course, or they may transfer to another university or take a year out, but they are still locked into their contract if they sign it within a few weeks to going to university.

Some letting agents and landlords take advantage of students’ transient tenancies. They are usually in a property for only a year and action for remedy may take a long time, so there is often no incentive for students to take action if they will be moving out within a relatively short period. Letting agents and landlords are aware of that and often do only minimal repairs because they think they can get away with it.

Only last Thursday, a group of four women students from Sheffield Hallam university came to see me to share their experience. They had faced a catalogue of problems last July when they collected the keys for their new home, which was unfit to move into. Among a range of issues, the house was filthy and full of rubbish, mattresses had blood and faeces stains, there was no carbon monoxide detector, taps and toilet seats did not fit correctly, blinds were broken and the extractor fan was broken.

When challenged, the letting agent simply said that there had been a busy change-over period with 400 students moving out on 30 June and 400 moving in on 1 July. However, the agent knew that that would be the case; it is like the staff of the refreshment kiosk at Bramall lane complaining that they cannot serve customers at half time because everyone comes in a 15-minute period. Letting agents know when the student change-over will happen, and there is no need for them to organise contracts in that way.

Most contracts for university-provided accommodation are for 42 weeks. Agents know that most students do not want 52-week contracts. The only benefit of a 52-week contract is that landlords get the rent, and that is the wrong driver. There is no reason why tenancy start dates cannot be staggered to allow for inspections and appropriate cleaning and repairs. The house that the young women were expected to move into was uninhabitable for two weeks until they forced basic action to be taken. Not unreasonably, they asked for their rent to be waived for that period, but they were told no, because they had signed their contract and had chosen not to live there.

The problems did not stop there. Sensibly, as young women they wanted individual locks on their room doors, which showed the marks of having had fitted locks previously, but they were told that under the contract they were not allowed to fit locks themselves and that the letting agent would arrange that at a charge of £80 a door. Such scams are unacceptable.

The student advice centre told me about wider problems with tenancy agreements from letting agents. They often do not contain the necessary legal information such as the landlord’s name and address so the students may not know who their landlord is. When they ask the agent, they are often told that they are not allowed to know.

Some agreements contain unfair terms that would not be enforceable in a court of law—for example, that tenants may not have friends or family staying at the property. There is a significant problem with letting agents on behalf of landlords failing to give students 24 hours’ notice that they will be doing repairs or showing prospective tenants round, and they may let themselves in with keys, sometimes without knocking.

The best letting agencies share the aspiration to stamp out bad practice, and the Association of Residential Letting Agents, the largest representative body, has called for statutory regulation. That is the nub of the problem. The absence of legislation governing letting agents is extraordinary.

Agents may voluntarily join a regulation scheme, but it is estimated that only 60% do so. Those who choose to join a scheme are likely to be the better and more responsible agents, but there is little that can be done to restrict the actions of the unscrupulous. It is an extraordinary omission that letting agents are not covered by the same requirement to be part of an approved redress scheme as estate agents under the Estate Agents Act 1979. Professional bodies for letting agents provide complaints procedures, but those agents who are not members are often the ones for whom tenants most need the procedures.

The problem is getting worse. The property ombudsman saw a 26% increase in complaints about letting agents between 2010 and 2011—a 26% increase in one year. There is a real need for a process by which all complaints and concerns can be addressed. An amendment to bring letting agents within the scope of the 1979 Act was tabled to the Enterprise and Regulatory Reform Bill in the House of Lords, and it would have been a positive step if the Government had accepted it.

The point we are all reaching is that greater regulation is needed. There is a consensus across the UK. Scotland has already banned the charging of fees by letting agents. In its upcoming housing Bill, the Welsh Assembly is seeking to require them to register and become accredited. As my hon. Friend the Member for Rotherham said, the OFT and Which? have called for action to be taken to tackle bad letting practice. Regulation would benefit tenants, landlords and decent letting agents.