Parliament’s scrutiny of the Tenant Fees Bill has exposed the common misconception that a letting agent works for both the landlord and the tenant. A letting agent is not, as David Cox, CEO of ARLA Propertymark had put it, “effectively the servant of two masters.” Letting agents typically act for only one side (usually, the landlord).
An agent’s role is to serve the interests of the person who appoints them. It is simply not possible to act loyally for two parties whose interests are at odds (e.g. when one side would rather receive higher rent and the other would rather pay less). To suggest otherwise is to contradict English statute and common law, the Property Ombudsman’s guidance, the forthcoming Tenant Fees Bill and even the Bible.
It is not clear why this myth is so prevalent, but it does the tenancy industry a disservice:
- It gives tenancy applicants false assurance that the agent they’re dealing with will act in their best interests. But while the agent must follow the law and not mislead, the agent is usually legally bound to act in the instructing landlord’s best interest.
- It confuses who tenancy applicants are contracting with when they enter a holding deposit agreement or sign the tenancy agreement. As recently confirmed by the Tenant Fees Bill’s sponsor, Lord Bourne, “[a] holding deposit creates a binding conditional contract between landlord and tenant where both parties agree to enter into the tenancy, subject to the satisfactory fulfilment of all pre-tenancy checks.” The agent’s role is typically to sign and handle money on the landlord’s behalf.
- It obscures who is benefiting from the agent’s services. Showing a prospective tenant through the property, performing reference checks, executing contracts, and delivering the keys are not “services” to the tenant. They are services to the landlord—tasks that the landlord would perform had s/he not contracted these responsibilities to her/his agent. It is proper that the landlord bear the direct costs. The tenant fees ban aims to ensure this.
- It puts landlords at risk when they misjudge the powers of agents to enter into contracts on their behalf. In particular, landlords who engage multiple letting agents run the risk that their agents will each take holding deposits from applicants on the landlord’s behalf. Lord Bourne was right to express concern that this would put the landlord in breach of contract with each.
Letting agents do have certain duties toward prospective tenants—not to lie, not to mislead, and to follow statutory obligations. These duties are imposed by law to protect tenants from underhanded practices. But they do not create an obligation to act in the best interests of tenancy applicants.
Confusion and disputes with tenants might be avoided if agents were clear from the outset about who their “master” is. This won’t diminish agents’ professionalism. Good agents will continue to provide a good service because they owe it to their client—the landlord—to attract good tenants.