OFT calls for new law to curb letting agents

The regulator is concerned about the level of complaints from tenants.

The Office of Fair Trading has called on the government to consider new laws for letting agents in order to “make the market work better for tenants”.

Following a review of rental market complaints, the regulator has said that agents should to be forced to provide a full statement of fees before a tenant signs a contract.

It said: "Agents can cause problems where they exploit customers' behavioural biases by not being transparent about their fees or what they have on offer.”

The regulator reviewed around 4,000 complaints made to Consumer Focus in 2011 and found that a majority of the concerns regarded fees and charges such as additional administration fees and poor customer service by lettings agents.

It concluded that many of the issues could be avoided should agents comply better with existing consumer protection legislation. However, it noted that more needed to be done to empower tenants and landlords.

Cavendish Elithorn, a senior director at the OFT, said: “It's important that tenants ask for key information, but we also believe that Government, industry and enforcers working together can have a real impact and improve overall standards in the lettings market

“This report sets out our view on what improvements could be made to address concerns with this market and we are keen to play our part in bringing together those involved in the lettings industry to focus efforts where they are most needed."

Richard Lloyd, chief executive at consumer group Which?, said that the recommendations were a “step in the right direction” but called on the government to do more.

It published its own findings in November after an in-depth study of the market.

"Our own investigation uncovered bad practice, high and unexpected fees and a lack of consumer protection that's failing both tenants and landlords,” he said.

"Information on compulsory fees should be provided upfront, in adverts or at the first point of contact with an agent, so that people can shop around."

“And the Government must act quickly to require all agents to sign up to a complaints scheme so that tenants know where to turn to for redress when things go wrong. This should be done by amending the Enterprise Bill currently before Parliament."

Currently, estate agents are required to join a complaints scheme, under the Consumers, Estate Agent and Redress Act 2007, but letting and managing agents are not.

An amendment to the Enterprise and Regulatory Reform Bill which, if passed, would require all lettings agents to sign up to a redress scheme is expected to be debated in House of Lords in March.

Russell Quirk, founder of the property website eMoov.co.uk, said the OFT's report was "an exercise in extolling the obvious".

"Yes, lettings agents should be regulated and many do fail to provide clear and adequate information to tenants and landlords alike," he said.

"Lettings agents have a terrible reputation and for good reason. The problem is that the Government have repeatedly said of late that they will not intervene in the property industry to regulate public concerns.

"And so, while this report is a step in the right direction, until ministers agree to take the lettings industry in hand I don’t really see the point of the OFT having conducted a paper that will, seemingly, be ignored by those with the power to change things.”