Hidden charges imposed by letting agents are exacerbating the housing crisis, The Local Government Association (LGA) has warned.

According to a report issued by The Office of Fair Trading (OFT), nearly 4,000 tenants and landlords have raised concerns around poor service and costs levied by housing agencies. This includes non-refundable admin fees which are in excess of £500,000.

Representing more than 370 councils in England and Wales, the LGA want to highlight that unfair agent fees and rogue landlords are detrimental to the housing market.

Councils are warning that, as well as offering a poor service to existing tenants, letting agent fees are so high that they are preventing people from being able to rent properties in Penarth and Cardiff, particularly those on small incomes.

To combat the problem, authorities are suggesting that more effective powers need to protect tenants from high fees from Cardiff and Penarth based letting agents and dishonest landlords.

Ian Potter, Managing Director of the Association of Residential Letting Agents (ARLA), said that tenants need to research their rights fully before entering contracts.

He commented: “As the LGA’s research shows, many consumers today are falling prey to bad practice in the private rental sector.”

“For this reason, we have been calling for regulation of the sector; currently anyone can set up shop, regardless of their training or experience and without any need to adhere to a code of practice or standards. Some local authorities are introducing licensing measures, but these are by no means the norm and this approach risks creating a confusing system that varies across the country.”

“The challenge is, with the current undersupply of homes, tenants may feel pressure to pay high fees, or live in substandard properties. In the absence of statutory regulation, tenants should do as much research as possible, and consult organisations like Citizens Advice, ARLA, or the Property Ombudsman. They should also check the terms of their fees and charges against Consumer Protection Regulations, or Consumer Contracts Regulations, as some of the cases cited by the LGA may be in breach of these.”

The OFT have set out a number of recommendations for Government, industry and enforcers in order to improve the market for tenants.

These include:

• Initiatives which make it easier for landlords and tenants to access quality, such as recognised logos

• Better compliance with legislation and in particular better up front information

• Agreeing an enforcement strategy for traders who do not comply with the law.

In addition, the OFT is planning to renew its advice on work and education, including developing new guidance on consumer protection laws for letting agents and evaluating unfair terms in tenancy agreements.

Tony Jones, representative of ARLA in Wales and Managing Director of Penarth based estate agent ACJ Properties, said that ARLA licensing will improve landlord standards across Wales and ensure tenants are receiving optimum service.

He said “It is a worrying fact that anyone can become a lettings agent. There are approximately 158 letting agents in Cardiff, yet only 18 have gone through the rigorous assessment to become ARLA licensed.

“LGA’s report shows that people are needlessly spending hundreds of pounds so that agents can carry out credit checks and references. It is unrealistic to expect people on a low income to afford such costs. This means that people that want to rent houses and flats in areas such as Barry and Cardiff Bay are very limited in their options. It is ARLA’s duty to ensure that these fees are justified.

“An ARLA license indicates that a landlord is of a high standard and will uphold regulations. As more landlords join this programme, the private rental sector in Wales will vastly improve and tenants will feel secure in the knowledge that they are being protected. At ACJ Properties, we ensure that all fees are transparent and made clear up front before any transaction is conducted.”