Consumer watchdog barks at letting agents

The knives are out for the private rented sector once again as it apparently “generates more complaints than almost any other”. According to a new report issued by Consumer Focus, the consumer watchdog, one of the biggest issues is that private renters often know very little about their landlords before signing a tenancy agreement.

Now the watchdog has written to some of the largest letting agents and deposit schemes in England calling on them to explore how online feedback could empower tenants by giving them a better insight into their potential landlords.

Consumer Focus is set to be axed in the gradual ‘Bonfire of the Quangos’, announced last year, having received £13.9m in funding in 2010; £5.2m of which came from the taxpayer and the remainder from the energy and postal industries.

Its latest report – ‘Opening the door’ – outlines the ‘information imbalance’ which works against consumers in the private rented sector. Just 15 per cent of tenants surveyed said they were able to find all of the information they wanted about a prospective landlord or letting agency.

Over a quarter could find very little or even no information and a third who had found information obtained it from the landlord themselves. By contrast landlords or letting agencies can ask tenants for references, deposits, guarantors or other personal and financial information.

Almost nine in ten tenants agree that a website to share experiences of landlords would help them to make better decisions before signing a tenancy agreement.

Consumer Focus research shows that over a quarter of renters had cause to complain in the past two years, making the private rented sector the second most complained about market. Many of the 1.1 million households who sign up for a new tenancy experience problems with their landlord which only become apparent after signing a legally binding agreement.

Consumer Focus believes that a website based on constructive feedback could help solve the information imbalance and help people seek out more reputable landlords and avoid the bad ones. Research by the consumer champion has found that websites where consumers share experiences are influential and that, perhaps surprisingly, most people leave positive not negative feedback.

The site would also reward and incentivise the better landlords in what is a rapidly growing market.

Claire McAnulty, Policy Expert at Consumer Focus said, "Currently the landlord is firmly in the driving seat despite rent being a massive outgoing for many of us. People often sign up with little more than a gut feeling after a cursory tour of the property – if they are lucky, they might have a word of mouth recommendation. The best way to help private renters is to ensure they have the information to know what they are getting into.

"There is huge potential for a feedback website to give tenants a better idea of whom they’re renting from. Getting behind a feedback website could also help the industry establish a better reputation and build up much-needed trust with renters."

Shelter Chief Executive Campbell Robb commented, "Shelter welcomes the findings of this report which clearly highlight the need for better regulation in the private rented sector. The findings echo complaints we hear every day from private tenants about the limited protection they have when they rent privately and the desperate lack of available information on landlords to help them make an informed decision.

"We are particularly keen to see the use of landlord accreditation grow. It is vital to raise standards, help tenants get information about their landlord, and provide landlords with the advice and support they need to offer a professional service to their tenants."

Ian Potter, operations manager of the Association of Residential Letting Agents (ARLA), had this to say, "The key issue is that in the absence of any government-driven regulation, there will always be unethical lettings agents and landlords who can operate outside of the jurisdiction of an organisation such as ARLA. This is why we advocate that the most important step in renting – or letting – any property is to thoroughly research local letting agents and fully understand the market context. It is only by doing this at the outset of the process that a tenant or landlord can ensure they are protected.

“Other measures to protect tenants, such as the consumer feedback tool that Consumer Focus is proposing, are worth considering. However, renting a property is not as simple as buying a product; there are many factors to take into account which can influence whether or not a tenant has a positive experience, not least the fact that renting a home is a very different, emotive experience than other major financial purchases."

In 2008, the last Government published a review of the Private Rental Sector in England (the ‘Rugg Review’). The review concluded that there is a supply and demand imbalance, particularly for properties affordable for tenants on low incomes. As a result, there will be a continuous demand for properties even if they are owned by landlords with a bad reputation. Consumer Focus’ report argues that for this reason market forces alone cannot be relied upon to ‘regulate’ the sector.

To help address consumer protection issues in the private rental market, Consumer Focus would like to see the introduction of a pilot tenant feedback website, ideally in conjunction with one of the tenancy deposit management schemes and a minimum common standard and quality mark to be introduced for all private landlord accreditation schemes.