The world of lettings is a complex one for an average tenant or a landlord newly acquainted with the property sector.
Letting agents can help take a lot of the stress and worry away from the work required, but with any professional relationship there needs to be understanding and fair gain for both sides.
When faced with letting agent fees, how do you know what’s fair?
Read on for a comprehensive breakdown of the fees you might be charged by a letting agent, what they might be for and how to know you’re getting the best deal for your money.
What fees can a letting agent charge in the UK?
For new tenants, moving into a property can often be the most expensive stage of the renting journey. However, there has been action in recent years against the fees that a tenant must pay when renting in the private sector.
The Tenant Fees Act introduced new legislation in 2019, seeking to ban most letting fees and placing caps on the tenants’ deposits. The act applies to tenancy agreements signed on or after June 1, 2019.
The aim of the act was to reduce the fees that many tenants found themselves facing when seeking to move into a new property. It prevents hidden costs that were not immediately visible in advertisements, ensuring the price shown is reflective of the true costs to a prospective tenant.
Now, new tenancy contracts can only include the following charges by landlords and/or letting agents:
- Rent payments
- Payments for early termination of a contract, where requested by the tenant(s)
- A refundable deposit – capped at five weeks’ rent for properties costing less than £50,000 in annual rent, or six weeks for those costing above £50,000
- A refundable holding deposit of no more than one week’s rent in order to reserve a property
- A maximum charge of £50 for agreement amendments such as variation or novation (higher incurred costs can be charged if reasonable)
- Charges in regard to utilities, TV licence, council tax, etc.
- Fees for late rent payments or replacement of required access items such as keys or security devices, if specified in the tenancy agreement
Furthermore, landlords are responsible for paying for letting agents’ services, helping to ensure fees charged for their services stay reasonable.
Holding deposit repayments are also outlined in an attempt to speed up the process, dictating that landlords may only hold them for 15 days unless another deadline is agreed in writing.
Something tenants should know is the Tenant Fees Act is exhaustive in its listing of the fees agents can charge. In other words, anything not listed as acceptable is forbidden, including agency and admin charges or inventory and referencing fees.
This makes it easily digestible for new tenants and gives them a ready-made list of charges they are likely to encounter. For people who are new to the concept of renting a property, for example students and young professionals, this is especially valuable and helps them avoid the pitfalls of more dishonest practices.
Attempts to circumvent the act can be met with harsh penalties. The first offence by a landlord or agency can be met with a fine of £5,000; a repeat offence within five years of the first can fetch an eyewatering fine of £30,000.
The upshot is a fairer market that’s more understandable for tenants, more valuable to landlords, and more ethical for everybody involved.
What can real estate agents charge landlords for?
Many landlords might struggle to manage their properties, either because they have a large portfolio or because they have more pressing commitments besides the property they own. Agents need to consider their fees for landlords versus the value and peace of mind they’re giving in return.
What landlords pay first depends on what they require. Some may only need tenants finding for their property, in which case they would be looking for reasonable letting management fees. Others may be in search of a more comprehensive property management service, which will mean fees to reflect the higher number of individual services included.
Agents can charge landlords for various services included in handling a property and sourcing tenants. These can include fees for:
- Finding tenants and arranging referencing
- Rent collection and chasing up arrears
There is no hard and fast rule on how much letting agents charge, or indeed how much they’re allowed to charge, but typically they are set as percentages of rent for the property in question.
This makes shopping around fairly straightforward for landlords, and means they can expect to see fees ranging from less than 10% of monthly rent to up to around 25%.
As with many things, this will be more expensive for those based in London. Some agents may charge a flat fee for their services, but the majority go by percentage of rent.
Averages for services include:
- Finding a tenant and arranging referencing will usually cost no more than one month’s rent
- Full property management will typically cost from 10% to 15% of total rent received
- Rent collection can cost anywhere from around 5% to 15% of total rent
Some agents will structure their fees in slightly different ways, such as charging a proportion of the first month’s rent plus a percentage of the total rent.
Other services, such as inventories, may come as a one-off flat charge. Understand these charges fully so that no hidden costs come out to surprise you later!
Are letting agent fees negotiable?
Yes – at least, they should be!
The market is incredibly competitive and landlords need to be sure that the return on their investment is at least as good as if they spent their own time.
The aforementioned Tenant Fees Act aimed, among other things, to level the playing field. Letting agents now need to incentivise landlords’ business and provide the best value for money that they can.
Landlords are always encouraged to shop around, not only for price but for services included. Some letting agents may include extra services as part of their package cost, whereas others may ask for extra payments to add them in.
How do I know I’m getting the right letting agents?
Choosing the right agents is about more than the letting agent fees you’ll pay for their services. There are lots of factors to consider for both sides of a tenancy agreement. They will often be the first point of contact for tenants and will be the ones making important arrangements such as utility services, repair work, and other solutions that may be necessary during a tenant’s time in a property.
If a letting agent isn’t administering a property to a satisfactory level, this can cause unnecessary friction for both the tenant and the landlord, making the chain of communication more difficult than it needs to be.
To ensure you’re getting the right letting agents for your needs, it pays to look into each of your prospective choices and investigate more closely.
How did you find them? Letting agents who have come through as a recommendation for trustworthy sources may be worth more of your consideration than the first one you found on Google or walking down your local high street.
Property management can cause some emotionally charged situations, such as when emergency work is needed to get a tenant’s hot water running again. Agents who manage these situations and end up with glowing praise are demonstrably performing their roles to a high standard. While all reviews need to be taken with a pinch of salt, letting agents with a high calibre of feedback ought to be noticed.
Another aspect to consider is whether a letting agent is registered with an official industry body. Some names to look out for are the Association of Residential Letting Agents (ARLA), the UK Association of Accredited Letting Agents (UKALA), and the National Association of Estate Agents (NAEA).
Membership of these accredited bodies shows an effort to uphold good business practices and high professional standards. Many letting agents may also include themselves as part of the Property Ombudsman to demonstrate openness to alternative dispute resolution, or the Institute of Residential Property Management (IRPM) as part of continuous professional development for their staff.
There are many different bodies and qualifications out there pertaining to property management – see which ones your prospective agents display on their website.
Additionally, it’s hard to overstate the importance of a letting agent that is local to the area they serve and the property they manage. For property in Bolton, who better to help than agents who understand Bolton?
Local letting agents are more likely to understand the demographics of their location and be involved in local charities and initiatives.
They will also likely have sound understanding of the local authority. This ultimately means a better knowledge to guide landlords and a more dedicated approach to helping people find the right property for them.
Ultimately, the best letting agents will be the ones that give you the services you need for a price that is competitive and represents value for money. Even in this day of contact forms and email correspondence, it pays to pop into your local branch and speak face to face with an agent. As a landlord, this helps you to get a feeling for their customer service and their approach to business.
This ensures that your money is going to the right people and that your name is going on an honest contract.
Can I avoid fees by doing this myself?
As a landlord you can save money on letting management fees by undertaking the duties of managing a property yourself. The question is not whether you’re allowed, but rather whether you have the time and organisation necessary.
Estate agents don’t merely do the paperwork needed to get a tenant into a property. Landlords have a duty of care to the people living in their properties, and letting agents can help to shoulder some of that duty and keep things running smoothly.
This can range from the short notice, reactive work such as arranging repairs or maintenance work, to the general work that goes into ensuring a property is fit for purpose. Letting agents may not only have more time to visit a property and inspect it, but they will have a professional, experienced knowledge of what is needed to ensure a tenant is living safe and sound.
Lettings with Mistoria Estate Agents Bolton
Mistoria Estate Agents Bolton are award-winning and reputable estate agents who understand Bolton as thoroughly as the people who live here. Our Little Lever office is staffed with friendly, informed people who can help landlords, tenants, and purchasers with any and all property queries.
To learn more about us and our services, get in touch today.