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Letting agents must meet transparency rules this month

Posted on 2015-05-07

Later this month all letting agents will need to comply with new transparency rules which will be enforced by local authorities.

Agents will be required to publicise a detailed breakdown of any fees they charge to landlords or tenants, state whether they are a member of a Client Money Protection (CMP) scheme and specify which mandatory redress scheme they are a member of.

Although most letting agents already do all three of these things – and have been doing so for some time – from May 27 all this information will be required by law to be prominent in offices and on websites under the Consumer Rights Act.

Last summer the government stopped short of an outright ban on letting agents charging fees to tenants but one of the outcomes of the scrutiny on the lettings sector was an amendment to the Consumer Rights Bill, requiring all letting agents to disclose their fees.

The full guidelines for agents and landlords have been published in a document named ‘The Private Rented Sector And Tackling Bad Practice: A Guide For Local Authorities’. Although the guide is aimed at the local authority staff that will be policing the rules, it also clearly sets out what is expected of landlords and agents.

While defending the majority of letting agents, the document stands by the assertion that there are a number of unscrupulous agents operating in the rental sector. It says that unscrupulous agents can make the renting experience worse by being unclear about their fees, not protecting client money and not advertising how clients can complain about poor service.

The document also explores the definition of a ‘bad letting agent’ and lists a number of activities that could be expected from incompetent agents:

- A lack of transparency in their fees and the charging of hidden costs;
- Charging exorbitant fees for renewing an existing tenancy agreement.
- Keeping tenants’ deposits unlawfully;
- Knowingly letting a property which is not safe or free from hazards;
- Helping landlords to move groups of people around properties to avoid enforcement action;
- Failing to notify a landlord of the full details of a let

The guidelines – which cover over 60 pages of information – also outline how the government is endeavouring to educate landlords and agents on their new legal requirements. By request of the government, last September the Royal Institute of Chartered Surveyors published a code of practice in association with 17 property organisations, including ARLA, The National Landlords Association and The National Approved Letting Scheme.

Here's a breakdown of the transparency rules:

Mandatory redress

From October 1st 2014 it became mandatory for all lettings agents and property managers to join a government-approved redress scheme. There are three approved schemes: The Property Ombudsman, The Property Redress Scheme and Ombudsman Services: Property.

The idea of mandatory redress is to allow tenants and landlords dealing with letting agents the opportunity to complain to an independent body about the service they have received. The government says it will prevent disputes from escalating and will be enforced by local housing authorities.

Any letting agent that has not joined one of the three redress schemes could be fined up to £5,000.What’s more, letting agents must now make it clear which scheme they are a member of in their offices and on their website.


Agents must disclose details of all fees, charges or penalties which are payable to the agent by a landlord or tenant in connection with an assured tenancy. The requirement is for agents to compile a comprehensive list of everything that a landlord or a tenant would be asked to pay at any time before, during or after a tenancy.

Agents do not need to publicise the following as part of this legislation:

- Rent payable to a landlord;
- A tenancy deposit which is taken as security against damage or violation of the tenancy agreement;
- Any fees, charges or penalties which the letting agent receives from a landlord under a tenancy on behalf of another person.

The guidelines stress that there is no scope for ‘surcharges’ or ‘hidden fees’. The document confirms that all costs must include tax and gives an example of individual costs the agent could outline (e.g. marketing the property, conducting viewings and preparing an inventory).

Client Money Protection

Client Money Protection encompasses a selection of compensation schemes run by numerous providers including SAFE AGENT, NFOPP, NALS and CM Protect. CMP provides compensation to landlords, tenants and other clients in the event that an agent misappropriates rent, deposits or other client funds. The purpose of these schemes is to raise industry standards and provide increased protection to consumers.

Letting agents who are not members of a Client Money Protection scheme must make this clear, silence on this subject is now a breech of legislation. As with the other requirements, this information should be prominently displayed in every office and on the website.

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