Some years ago, before the financial crisis I can remember getting into a somewhat long and complicated debate about the fees charged by rating agencies to provide credit ratings to companies issuing bonds.
It seemed to me at the time to be wrong that the issuing companies paid those fees, rather than the investors who benefited (or not) from the ratings. I accepted that if investors were to pay then it was likely that the costs would in some way be passed back to the issuers, perhaps by way of pricing on the bonds, but the fact that the investors did not pay for the rating left a gap in accountability.
That gap in accountability was dramatically exposed by the financial crisis.
I found my thoughts drifting back to that debate today, when I read about Ed Miliband's latest proposals to address perceived problems in the residential lettings market.
There is of course much that many landlords, including me, will dislike or disagree with in those proposals; and I am sure (if they are ever enacted) that the law of unintended consequences is likely to come into play.
However, I find myself thinking that, in respect of the tenancy fees element of his comments that Mr Miliband is right. Letting agents are instructed by landlords and not by tenants and the agents' responsibility is to the landlords. It is clearly the landlords that gain the benefit from credit checks, inspections and other administration for which fees are commonly charged.
As with the rating agencies, I think that responsibility for fees should rest with the party who benefits from the service provided which, in the residential lettings market, is the landlord. Otherwise an accountability gap exists that could well contribute to problems that we have yet to fully foresee. Additionally as the landlord is not paying there is no 'market' control on the level of the fees. In most cases the tenant will have to just accept the charges, whereas if the landlord were paying he could compare total lettings costs much more easily.
Of course the tenant may ultimately bear the cost by way of an increase in rents, but if all lettings were undertaken on that basis then it would be easy for the tenant to compare different options.
There is no doubt in my mind that were such a control imposed, the additional costs charged by agents would fall dramatically over time leading to a better overall deal for both tenants and for landlords.
THIS PIECE WAS ORIGINALLY PUBLISHED ON 3RD FEBRUARY 2015