The dust has settled since the storm broke in March, whipping up an unprecedented attack on lettings agents from several organisations.

On March 5th, Which? the consumer champion railed against lettings fees for tenants, naming four agencies which they deemed to be ‘acting unlawfully’ by not advertising their fees to tenants.

The next day, the Advertising Standards Authority issued a ruling against Your Move Lettings’ advertising. The following week, a CLG Select Committee called in leaders of the Private Rented Sector to give oral evidence on industry practices.

All of these events caused confusion in the industry and could dramatically change the way rental properties are advertised in the UK.

WHICH? ON FEES

Which? published the results of its mystery shopping investigation into transparency of letting agent’s fees. The consumer watchdog reported that it, “believes that major letting agents are acting unlawfully by not being upfront about the fees charged to clients.

“We sent mystery shoppers posing as potential tenants to four di erent London branches of each of Foxtons, Barnard Marcus, Martin & Co and Your Move. We believe that the fees tenants pay are not disclosed early enough. This means renters face unexpected charges, are unable to compare prices and don’t always know what they are signing up to until it is too late.”
Their ‘snapshot’ found:

● None of the letting agents provided information about fees in any property listings on their website, on Rightmove or after tenants had registered online.
● Only one tenant (at a Foxtons’ branch) was proactively given fee information when they registered in branch or called to arrange a viewing.
● No tenant was provided with a written schedule of charges.
● In some cases tenants were either not given fee information even when they asked or they were not given the complete details.

“Which? believes that by failing to disclose fees upfront or during their first contact with a customer, letting agents are breaching consumer law by not providing material information in a manner that is clear and timely.”

Richard Lloyd, Executive Director at Which? said, “Renting is now the only housing option for millions, and with many households struggling to pay rent and bills, it is vital that letting agents are upfront about expensive fees in advance. People should know all the costs before they invest time and effort in viewings. Drip feeding fees is unfair and a major barrier to people comparing agents and properties.

Which? is calling for: An end to hidden fees – information about the fees that tenants can expect to pay must be provided upfront, in adverts, on websites or at the first point of contact with an agent, so that people know what they are signing up to and more easily shop around.

Drip-feeding fees is unfair and a major barrier to people comparing agents and properties.” Richard Lloyd WHICH?

Increased consumer protection and redress – renters must be given the same legal
protections as people buying and selling property and letting agents should be covered by the same legislation as estate agents.

THE ASA RULING

The Advertising Standards Association (ASA) issued a ruling against Your-move.co.uk Ltd., trading as Your Move Lettings (YML), regarding its advertising on Rightmove after a single complainant challenged whether the ads were misleading because they did not include a compulsory administration charge.

The ASA statement said, “Ads for properties for rent posted by an estate agent on rightmove.co.uk. The ads provided general information about the properties as well as the cost of rent per calendar month.

“The complainant challenged whether the ads were misleading because they did not include a compulsory administration charge. CAP Code (Edition 12): 3.1; 3.19; 3.3.

“The ASA noted that the exact value of the administration fee depended on the location of the property as well as the consumer’s individual circumstances. We therefore considered that it was not always calculable in advance. CAP Code rule 3.19 stated, “If a tax, duty, fee or charge cannot be calculated in advance, for example, because it depends on the consumer’s circumstances, the marketing communication must make clear that it is excluded from the advertised price and state how it is calculated.”

We noted YML’s argument that the details of the administration fee, whilst material information at the time the consumer was deciding whether to rent, was not material when searching Rightmove and arranging viewings. However, we considered that deciding whether to arrange viewings was itself a transactional decision and likely to be affected by the existence and cost of an administration fee.

We therefore considered that this was material information when consumers were searching Rightmove, not just when they were deciding whether to rent. The ads should have indicated clearly that the administration fee was not included in the quoted prices and should have provided enough information to allow the consumer to establish easily how further charges would be calculated. Because the ads did not include this information, we concluded that they had breached the CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising) and 3.19 (Prices).

The complaint was upheld. The ASA said, “We told Your Move to ensure that their ads made clear when non-optional fees and charges, that could not be calculated in advance, were excluded from quoted prices, and to provide enough information to allow the consumer to establish easily how further charges would be calculated.”

However, there is no clear direction on what must be stated, or where it is stated, or from when the ruling comes into effect.

The ultimate sanction the ASA has is to refer non-compliant agents to the OFT.” Isobel Thompson NALS

Your Move said, “Your Move is committed to regulatory compliance as demonstrated by active participation in the The Property Ombudsman scheme and the Association of Residential Lettings Agents and is therefore disappointed by the ASA Council ruling. “Your Move follows good industry practice and is compliant with the ARLA and TPO Codes of Conduct and the Consumer Protection Regulations. All material information including tenant fees is provided prior to tenants making their decision to enter into a Tenancy Agreement. This complies with the OFT’s Guidance for Estate Agents. Your Move also complies with the contractual requirements of Rightmove where publication of fees within advertisements is expressly prohibited.

“Your Move is updating references to fees in lettings advertising and will continue to take any steps necessary to comply with CPR as we currently interpret it. In view of the ASA decision we continue to ask the OFT to produce official guidance for Lettings urgently to ensure greater clarity and uniformity across the industry.”

The Select Committee

At CLG’s Select Committee session on The Private Rented Sector, held in London on 4th March, the lettings industry was represented by Mark Hayward, MD, NAEA (for ARLA), Caroline Kenny, Executive, UKALA, Peter Bolton King, Global Residential Director, RICS and Christopher Hamer, The Property Ombudsman. They were grilled on the way the private rented sector is functioning – with a strong focus on fees and transparency.

All our industry representatives answered the questions extremely well, and stood their ground. As ever, from the Committee’s questions and attitude it seems that the professional section of the industry is both accepting of and responsible for the actions of ‘rogue’ agents. The transcript: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmcomloc/uc953-iii/uc95301.htm

Interim Guidance

While the complaint and the ruling refers only to Your Move, it effectively applies to all letting agents advertising properties to let, which means significant changes ahead.

Later in March, agency representatives met the OFT to discuss the implementation of the ASA ruling on advertising of fees. The meeting was chaired by NALS, whose Chief Executive, Isobel Thomson said, “Since the ASA ruling the industry has been trying to reach a conclusion as to how agents can comply. Given that the ultimate sanction the ASA has available is referral of non-compliant agents to the OFT or Trading Standards, it made sense to meet with them in light of their regulatory role at the earliest opportunity.”

We’ll work with the other industry bodies and CAP to bring even more clarity to the situation.” Caroline Kenny UKALA

On 5th April, a joint statement was issued by TPO, ARLA, RICS AND UKALA: Representatives from TPO, ARLA, RICS and UKALA met the Committee of Advertising Practice (CAP) on 22nd March regarding the ASA ruling on disclosure of non-optional fees responsible for issuing guidance on how, in practical terms, the obligations now placed on letting agents by the ASA ruling can be met. The group welcomed CAP’s offer to the organisations attending the meeting for further involvement in process of defining the best approach for guidance.

CAP had provided, in advance of the meeting, some draft guidance which will now be developed further in the light of the discussions and in consultation with the group. The industry representatives emphasised where urther detail would be helpful, specifically with regard to how the role of internet portals might need to be brought within the scope of the guidance. CAP recognised the importance of providing clear and relevant advice including illustrative examples. CAP also appreciated the need to finalise this guidance promptly. At the meeting it was determined that:

● Only fees relevant to the transactional decision should be disclosed more transparently. Precisely which fees this will apply to remains to be determined but we will continue to work with the CAP to provide further clarity in this regard.

● No enforcement action will be taken until the CAP guidance has been finalised and thereafter a period of grace of at least one month will apply to enable agents to develop their approach to compliance before enforcement commences.

The ASA ruling makes clear that consumers need more information up front about non-optional fees. It is highly likely therefore that agents will need to make changes to advertising across all forms of media to comply. However until the formal guidance is issued agents should ensure that their current advertisements do not disadvantage the consumer either by giving misleading information or by omitting material information. For the avoidance of doubt the ruling does not apply to fees payable by landlords to letting agents.

We will be reviewing the situation in next month’s The Negotiator and hope to have industry guidelines then.