Member Article

High Price Poor Service Letting Agents Must Go

Only in London are there now more real estate agents than independent butchers, greengrocers and fishmongers put together. Tales of the generalised greed that exists in the rental sector pop up in national news with depressing regularity, highlighting a state of affairs that I believe is about to be changed radically, not through government intervention, but as a result of technology and innovation.

A recent story published in the Guardian last week saw a young tenant take on the Goliath of London’s “largest estate agency brand” - Winkworths. The agency asked for £2,272.50 from the incoming tenant for little more than adding his name on a contract, all for a room in a shared house where the tenant’s part of the rent is £612.50 per month. In this particular case, the tenant happened to be a lawyer, and his strongly worded complaint letter saw the agency lower the fee to ‘only’ £210 and apologise profusely.

A very small victory if you consider that across the UK a new tenant will be charged an average of £337 by a lettings agency, a sum that rises to £600 for the Capital. Adding insult to injury, letting agents are double dipping, charging both landlords and tenants, including unnecessarily charging for administrative work such as contracts and inventories. A landlord will be charged the equivalent of two to four weeks’ rent for finding the tenant, and will pay an average of 10 per cent of the rent for ongoing property management, which can go all the way up to 17 per cent for some agents in London.

Add to these inflated fees the countless bad customer service experiences, ranging from lost keys and unanswered calls to blatant lies, and it’s easy to understand why letting agents are among the most hated people in the UK (still behind politicians) according to Ipsos Mori. It’s also easy to understand the collective sigh of joy after the Autumn Address last year, at the news that letting fees to tenants will banned. But the change has not come into effect yet, there is no specific timetable for it, and it is still under debate whether it will really impact anything for the better.

Lettings agents say that all the ban will do is move the fees on to landlords, which will in turn see landlords increasing rents. They’re a group that is already facing hard times, having seen stamp duty for buy-to-let increased last year, and their ability to deduct their business costs from their taxable income reduced this month. Most UK landlords have one rental property, and the squeeze will see them losing the profit from it, which will further push them to sell it.

Set against this, the amount of people privately renting is increasing fast, while the realistic chances for young people to afford their own property is not. By 2025, 59% of 20 to 39 year-olds in England will be privately renting, and it’s easy to see how an already dire housing situation can become catastrophic - despite the government’s best intentions.

So is there any way to escape the clutches of the traditional letting agents? There is, and it is mostly in the power of landlords to break the circle. While tenants have little choice in which letting agent to use, landlords can think with their feet and, thanks to technology, they now have other options besides the overpriced and antiquated letting agent model.

The first major move in the industry came with the advent of property portals like Rightmove and Zoopla. Most tenants find housing online, and agents switched to generating their leads from these portals. As advertising property on these sites needs to be done by a letting agent, the next logical step was the apparition of the ‘online letting agents’. For a much smaller fee, these services will market the property across the portals. The landlord pays a small fee and uploads the rental details onto the online agent’s website. When a prospective tenant makes an enquiry, the landlord receives it and arranges the viewings and manages all the other details of the tenant moving in by themselves.

However, the next step in the rental revolution is upon us. The industry is moving towards PropTech players that use the latest technology to take things further than the simple ‘tenant find’ to giving landlords a complete property management service. It is this technology that will enable landlords to manage their properties (as much or as little as they like), whilst keeping costs down, often by simply paying a small monthly fee.

The traditional lettings industry has been lagging so far behind and there are both landlords and tenants so used to the outdated model, that other options can appear daunting. But things are changing fast, and I’m confident that the more horror stories of unreasonable fees and a lack of transparency we see around traditional lettings agents, will hopefully tip the scale for landlords up and down the country towards the tech alternative. Progress is impossible without change, after all.

This was posted in Bdaily's Members' News section by Calum Brannan .