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Renters forced to pay hundreds in ‘unethical’ fees

Letting agencies are earning thousands of pounds in commission and sometimes flouting the ban on tenant fees by forcing renters to sign up for controversial “zero deposit” schemes.

An Observer investigation has uncovered evidence of pressure-selling tactics by some agencies in England, including cases where people were told they were required to sign up as a condition of securing a tenancy.

Touted as a low-cost option, zero deposit schemes typically involve a fee equivalent to about a week’s rent instead of a standard security deposit, normally five weeks’ rent.

But unlike a traditional deposit, the fee is non-refundable, with tenants remaining liable for damages at the end of their tenancy. They can also face extra costs for membership renewals and – unlike with standard deposits – face fees for adjudication in case of a dispute, leaving them worse off in the long run.

Despite the concerns, renters are routinely being advised to sign up for the schemes by letting agents, who stand to earn a commission of up to 30% for each person they refer.

The pressure-selling allegations and concerns about the level of protection the schemes offer have led to warnings of a PPI-style misselling scandal from senior industry figures, with one expert accusing letting agents of “preying on” tenants by pushing the schemes.

The Observer spoke to six renters who had rented properties in different parts of the country through different agencies. Still, all say they were not given a choice or were pressured by agents into signing up for zero-deposit schemes.

Travis and his partner Hannah, from Bath, said they were forced to enrol in a zero deposit scheme after applying to rent a house in Cornwall, which involved payment of a £225 non-refundable joining fee.

They asked instead to pay a standard deposit – which would be protected in an authorised scheme and is usually fully refundable aside from damages – but were told that was not an option.

“If that is something that will be a deal-breaker for you, the landlord would more than likely look to the next applicant who would be willing to go down the zero deposit route,” the letting agent said in an email.

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