Shelter carried out mystery shopping with 58 letting agencies across the country and found that all of them charged renters fees to set up a tenancy on top of deposits and rent in advance.
Average fees charged were almost £350 with almost a third of agencies charging renters more than £400 to set up a tenancy and a further seven charging more than £700.
These charges are in spite of the fact that letting agencies typically receive separate fees from landlords to set up a new tenancy on their behalf.
In some of the letting agencies investigated by Shelter, fees charged to renters – sometimes hundreds of pounds – weren’t refunded even when, through no fault of their own, the deal didn’t go ahead.
Separate research commissioned by Shelter found that:
• 1 in 4 people who have dealt with a letting agency in the last three years said they had to borrow money to pay for fees.
• 1 in 6 reported cutting down on food or heating to meet the cost of fees.
• 1 in 4 say that letting fees have stopped them from getting a new home.
Shelter is petitioning politicians to end letting agency fees charged to renters to set up a tenancy, including ‘administration’ fees, ‘holding’ fees, credit check fees and ‘check-in’ fees.
It believes that asking landlords to cover the costs of setting up a tenancy is a fairer way of doing business as it is landlords, not renters, who have the power to choose one agency over another, to negotiate the fees charged and to terminate a contract.
Campbell Robb, Shelter’s chief executive, said: “‘This shocking research reveals that letting agency fees are 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.
“Anyone who’s tried to find a rented home in the past few years knows that affordable, decent places to live are in short supply, and often snapped up within hours. The high demand for rented homes means that renters can’t shop around, but instead have to deal with the letting agency their landlord has chosen: they have no choice but to swallow their anger and stump up their cash.
“People often forget that the landlord is the real customer of a letting agency, but the fact that renters also pay fees leaves both expecting the agency to act in their interests. This adds up to a confusing situation that leaves landlords in the dark and renters powerless.
“The only way to fix our broken lettings market is for the Government to stop renters being charged for the costs of setting up a tenancy. This would put landlords in a stronger position to negotiate the best deals, restoring healthy competition to the market and releasing renters from the burden of paying out hundreds of pounds in sky-high fees.”