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Landlords urged to take action to offset higher letting agent fees

Buy-to-let landlords are being advised to think seriously about how they can recoup costs to help pay for higher letting agents fees.

Several reports suggest that many letting agents are likely to review their charges once fees to tenants are banned next year, with a lot of upward pressure on landlord charges after the ban widely anticipated.

The government's impact assessment of the fees ban estimates that the collective cost to landlords in the policy’s first year of operation will be £82.9m, while it also estimates that the caps on security and holding deposits, which will also be introduced next year, could cost landlords a further £1.3m.


It is widely anticipated that the additional cost to landlords will come in the form of higher management fees from letting agents looking to replace lost income.

The impact assessment estimates that the cost to letting agents in the first year of the ban will be upwards of £157m, which is why PropTech startup RentalStep is advising landlords to consider their monthly outgoings and start shopping around for products that could save them money.

“It’s time for landlords to evaluate their options to ensure the new law doesn't have a negative impact on their property business,” said Mike Georgeson, founder and chief executive of RentalStep.

He continued: “It’s clear from the government’s figures that the post-fees ban landscape is likely to be an expensive one for landlords at a time when the cost of letting a property has never been higher.

“That's why landlords need to shop around and explore alternative options to make sure they are getting value for money when it comes to necessary services such as tenant referencing and property advertising.”

Technology and innovation also have an important part to play in keeping landlords’ costs down, according to the PropTech entrepreneur.

“Products that utilise technology effectively can provide more efficient and time-saving processes at a lower cost than many traditional options,” he added.

“The rental market is changing at a rapid pace and if landlords want to remain successful, they need to find solutions that can help them to keep their properties occupied for a lower cost.”

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    surely there is only one way to recoup extra expense, pass it onto the tenant by means of increased rent, there is no shortage of people out there looking to rent a property.

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    If you increase the rent a landlord will see this as theirs and will not then be happy to pay an increased letting fee. In Scotland they are telling tenants to get references themselves and come back with them! So it will be down to the tenant to produce a reference from a reference company the agent is happy to accept. There are already FEE reference companies. It is going to confuse the tenants and in many cases they will be paying for their references by paying the reference company directly. This tenant fee ban will hurt the likes of Foxtons who charge far too much money to tenants which is why its come about!


    This is the first time I've heard of referencing companies, and to me it sounds like another money spinner. Why would anyone pay a third party to arrange referencing when they could provide their own credit check, proof of income, and references from previous landlords, letting agents, and employers?

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    Landlords have, to some extent, already had their money. The hike in tenant fees has been the result of a decrease in landlord fees. Landlords used to pay around 12-15% for full management but agents competing for business have reduced those fees and swung the deficit onto the tenant for whom the fees are not tax deductible. The pendulum has swung too far in many cases leading to the tenant bearing a large cost whilst the rents did not decrease to factor that in. The agents have been happy as one way or another they have got their money, the landlord has been happy as they have been paying reduced fees, and the tenant has borne the brunt.


    thats life--the customer always pays


    Not necessarily Terry - If my newsagents rent increases I don't expect to pay more for my Crunchie Bar and daily rag. Some things are fixed price, some are down to market forces and some can be marked up.

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    rents are open market--so far!


    Indeed they are. But it's worth remembering that not all landlords will be affected by a rise in fees, some agents will not increase their fees, some landlords don't use agents, and some landlords will take any rise on the chin as they were used to paying much higher fees. Equally the changes in tax treatment of interest only affect some landlords. Many will be unaffected. Therefore the market may not support an increase in rent for either of those reasons.

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    More potential tenants than available properties means market forces will allow rents to increase, even if landlords are unaffected by any of the increases cited above. Tenants might need to cut back on expensive coffees, holidays and pcp cars as finding money for a home has to come first. Tenants can forego a Crunchie or Morning Star some days if cash is short but rent needs paid for every day they live in a property. Happy Days!


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