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Letting agent fees 'out of control'

Letting agents' fees are now "truly out of control" and tenants are having to go without food or turn off their heating to cover the costs, a housing and homelessness charity has warned.

A mystery shopping exercise by Shelter among almost 60 letting agencies across England found they charged renters £350 in fees on average to set up a tenancy, on top of deposits and up-front rent.

Shelter is calling for an end to letting agency fees charged to renters just to set up a tenancy, including costs for "administration" and credit checks. Tenants are being handed these extra costs in spite of agents often receiving separate fees from landlords to set up a new tenancy on their behalf. In some cases, up-front fees were non-refundable even if the agreement fell through through no fault of the tenant, the charity said.

Around one-quarter of renters who dealt with a letting agency in the last three years had to borrow money to pay for the fees, while one in six had to cut down on food or heating to meet the costs, Shelter said.

The Office of Fair Trading (OFT) recently analysed 4,000 complaints made by tenants and landlords to Consumer Direct about the lettings market and found that nearly a third (30%) were about fees and charges.

Landlords and tenants are being "drip-fed" extra charges when they have already signed a contract, making it harder for them to switch to another agent without racking up extra costs, the OFT also found.

The Royal Institution of Chartered Surveyors has likened the letting sector to "the property industry's Wild West''.

Shelter says the problem is made worse by the strong competition in the rental sector in recent years among tenants who struggle to make it onto the housing ladder, meaning that decent properties are often "snapped up within hours".

Campbell Robb, chief executive of the charity, said: "Letting agency fees have now become truly out of control. When renters have to find hundreds of pounds in fees each time they move, on top of deposits and rent in advance, it's not surprising that fees are causing real financial hardship and, in some cases, preventing people from moving at all."

Housing minister Mark Prisk said: "While most letting agents offer a good service, clearly some of the practices highlighted in this report are a cause for concern. I agree with Shelter that we need to take action to drive up standards in the sector. But a blanket ban cannot be the answer to tackle a minority of irresponsible agents. We are already changing the law to require all letting and managing agents to belong to an approved redress scheme which will give tenants an effective way to address complaints."

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