On 14 February 2013, the Office of Fair Trading (OFT) published a report on the lettings market, in which it examined features of the market and the reasons for high levels of consumer complaints. In addition to considering the application of consumer law to practices of letting agents, the OFT has examined the features of the lettings market. It sets out its views on what key features are needed for a well functioning market. The OFT sets out various recommendations to government and industry to improve the functioning of the market, as well as identifying actions that it intends to take (including issuing and revising guidance).
Consumer Direct receives a large number of complaints about the lettings market each year. The OFT has also taken various consumer enforcement action and consumer advisory work in relation to aspects of the operation of the lettings market. However, given high levels of consumer dissatisfaction, the OFT decided to conduct a detailed review of the lettings market in order to understand the reason for and focus of the complaints received.
The OFT has identified the following features of the lettings market:
The demand for rental properties is increasing and is expected to continue to increase. Rising demand for private letting properties has encouraged more landlords and letting agents to enter the market.
Many tenants are young and potentially inexperienced. Many landlords may be relatively inexpert, meaning that they may rely heavily on any agent they instruct. Landlords and tenants may not themselves fully understand their rights and duties.
There has been an increase generally in the use of letting agents in private rentals. Lettings agents have an important role in driving standards in the lettings market.
The lettings market is very fragmented, in that most of the agents are small firms, although there are a number of large national corporate players. This is largely due to the local nature of the market.
There has been an increase in online activity in recent years, with many firms advertising their services on the internet making it much easier for consumers to access properties from a variety of agents.
Regulatory and capital barriers to entry in this market are low, meaning that it is relatively easy for new agents to open and compete for business. There are also limited economies of scale.
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