Jeff Salway: Sheriff needed for cowboy letting agents

'The deposit scheme was a step forward, but it didn't go far enough'. Picture: TSPL
'The deposit scheme was a step forward, but it didn't go far enough'. Picture: TSPL
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ARE they cowboys in a “Wild West” market taking advantage of rising demand by ripping people off with impunity?

Or are they honourable decent operators doing the right thing by their customers despite flagrant abuses of the law by an unruly minority?

The reality lies in between the two, though I’d lean more towards the latter. I’m referring not to the banks or the energy companies, by the way, but to Scotland’s letting agents.

They’re making hay in a thriving market right now, as demand escalates and rents rise accordingly.

However, they were hit by two regulatory changes last summer that gave them a little cause for concern. The first was the launch in July of Scotland’s tenancy deposit scheme, under which deposits must be held by an independent scheme administrator and disputes over withheld monies ruled on by an independent resolution service.

Then in August came the Scottish Government’s clarification that letting agent charges other than rent and a refundable deposit are illegal under the Rent (Scotland) Act 1984. It acted following the success of Shelter Scotland’s “Reclaim Your Fees” campaign, encouraging tenants to claw back upfront fees purporting to cover expenses such as inventories and reference checks.

Shelter Scotland claims that up to 90 per cent of letting agents have charged “extortionate and unlawful” fees.

The legislation would result in tenants paying more, letting agents warned, but the greater transparency was welcome.

That improved transparency didn’t last long, however. Not content with passing any extra costs to landlords and ultimately to tenants, letting agents have found new ways of securing an unfair advantage.

Some are getting around the fees crackdown by charging a higher initial rent. Others, including some of the biggest letting agents in Scotland, are circumventing the deposit scheme requirements by taking a non-refundable “cleaning fee” in lieu of a deposit. Tenants accepting that arrangement are allowing agents to avoid registering their deposit, leaving them unprotected by the new scheme.

The Edinburgh Private Tenants Action Group also reports that certain letting agents are allowing tenants to provide their own referencing information to save paying a fee, only for the agent to demand more checks than they would carry out themselves. Moving the goalposts, I think you’d call it.

This is the respectable end of the practices to which Shelter Scotland alludes when calling again for letting agents to be regulated. Earlier this month it warned that “cowboy” letting agents were getting away with unscrupulous and often illegal behaviour in an unregulated sector “reminiscent of the Wild West”.

Strong words that were backed by some letting agents and surveyors, but dismissed by the Scottish Association of Landlords as “negative sensationalism”.

You can understand why Shelter Scotland ruffled a few feathers, particularly on the respectable side of the private rented sector. However, it also made the point that those playing by the rules stand to benefit more than most from regulation of the sector in Scotland. Two letting agents I spoke to last week couldn’t have been more in agreement. They’re sick of the damage inflicted on their reputation by dodgy operators making a quick buck as demand for rented accommodation reaches unprecedented levels, especially in Edinburgh and Glasgow.

I’ve had more calls in the past month from letting agents telling me about illegal practices their less scrupulous peers are indulging in than I’ve had in the past four years.

The deposit scheme was a step forward, but it clearly didn’t go far enough. More people are renting and they’re doing so for longer, but they’re not getting the protection they need. Further regulation is needed, and soon.