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The lettings market – an OFT report

Publication date: 14 February 2013

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Background

The lettings market is a significant part of the UK economy, but it generates a high level of complaints. The OFT has carried out a review of the sector, based on an analysis of a large number of complaints, and considered ways forward to tackle the issues that appear to be problems in the market.
 
The OFT analysed all of the Consumer Direct complaints on the lettings market for 2011 (amounting to nearly 4,000 contacts)and produced an Intelligence Report (Annexe D (pdf 672kb)), based on our findings. We sought feedback on our analysis from a number of stakeholders, many of whom had attended an event we hosted on the subject of 'Fairness and transparency in letting agents' charges' in September 2011.

Our Intelligence Report (pdf 672kb) found that the main areas of concern for tenants were surprising and high charges, confusion about holding deposits, misleading advertising, repairs not being carried out on the property and non-refund of security deposits. Landlord's concerns focused, amongst other things, on agents not doing what they agreed in the contract and not passing on rents collected.

The lettings market report sets out the OFT's views on why these problems may be occurring and how enforcers, industry, customers and government can make a start on tackling them, so that the market works more effectively.

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Summary of findings and key recommendations 

This is a market where large numbers of landlords may lack expertise in and the complexity of housing law means that tenants may not understand their rights and obligations properly. Letting agents play a pivotal role in the lettings market, where they are involved in the letting transaction, both in bringing landlords and tenants together, and in bringing valuable expertise and experience. However agents can cause problems where they exploit customers' behavioural biases by not being transparent about their fees or what they have on offer. A lack of clear and timely information about fees or quality of service means that customers are less likely to make good decisions. Further, agents' interests are not always aligned with those of landlords who instruct them or the tenants who may rely on them for guidance.

We think that many of the problems that appear in this market may be solvable through greater compliance by professionals with existing consumer protection legislation, but it is also important that those using letting agents' services can be empowered to be more demanding customers. We also make some recommendations to Government, industry, enforcers and consumer bodies, about the ways we think they can help to tackle the issues that we have identified. In summary, these our findings and recommendations include:

  • Better compliance with legislation already in existence and in particular better up front information. Ideally we would like fees to be set out in a clear tariff of charges at the start of the process and certainly before any contract is signed.
     
  • Initiatives which make it easier for landlords and tenants to assess quality and compare one agent's services against another, such as recognised logos which signify minimum standards are met.
  • A general redress mechanism so landlords and tenants can sort out problems when they occur. This is supported by a number of industry players. Consideration needs to be given to the cost this would impose on traders and the extent to which it would restrict new entry to the lettings market.
  • Mechanisms which protect money, i.e. more widespread use of client money protection mechanisms and better compliance with the mandatory Tenancy Deposit Protection Schemes. We think that greater transparency about these requirements would be helpful, so any additional steps the UK Government, industry and consumer groups can take to raise awareness would be particularly useful.
  • What more can be done to help landlords and tenants to help them understand and compare what existing codes offer, so they can more easily make informed choices and know what to look for when trying to find a good letting agent.

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Further work

The OFT suggests a number of recommendations  for Government, industry, enforcers, and those involved in consumer empowerment and education to work together, to devise and deliver an agreed strategy to raise standards within the lettings sector. We are hosting a series of events to discuss our findings and what action can be taken to make the key features of this market work more effectively.

The OFT is keen, so far as its remit allows, to play a role in supporting the development of any overarching strategy. As a next step, in addition to producing this report the OFT will also by the end of this year:

  • Produce and consult on a document which will provide UTCCRs/CPRs/BPRs guidance for letting agents - see OFT consultation on draft guidance for lettings professionals.
  • Review the substance and accessibility of existing OFT Guidance on unfair terms in tenancy agreements (OFT356).
  • Work with other organisations to publish 'quick guides' and other information sources for tenants and landlords to help them engage better with the lettings process. Sample 'quick guides' for tenants and landlords are published within the report (Annex A).
  • Launch a UTCCRs Hub, similar to our existing Distance Selling Regulations and Sale of Goods Act Hubs, which we hope will be a useful resource for agents and professional landlords

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Related documents

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Contacts




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