Striking the balance between fees rise and new benefits
The bill banning tenant fees was introduced in May 2018 and despite protests and lobbying it is likely to be made law as early as April 2019.
Fees are deemed as any charges made to tenants and licensees in the private rented sector on top of the rent, such as reference checks and inventories, with the exceptions being a refundable tenancy deposit (recently proposed to be capped at 5 weeks rent equivalent), refundable holding deposit and tenant default fees. The ban does allow the holding deposit (one-weeks rent) to be retained to cover the cost of a failed reference if it can be proven that the tenant mis-led the agent prior to referencing; with exaggerated income for example.
These additional services, which can be time consuming, but are deemed necessary by most landlords and agents, will impact on tenants, landlords and letting agencies alike, mostly through cost and service. It is generally expected that rents will rise as landlords face increased fees from agents. So, what can agents do to protect themselves, their landlords and their tenants?
Agencies need to remain competitive as attracting and keeping landlords is key to their survival, so any increase in fees to landlords for tenant-finds and management needs to be off-set by an increase in the benefits to landlords for using their services. ARLA propertymark is expecting the cost difference between tenant-find and managed services to decrease and for more landlords to opt for a fully managed service given the increasingly complexity and changing lettings legislation. This could be an opportunity for agents to restructure their fees or introduce a level of fee standardisation across their services; combined with greater benefits both will help attract landlords. Better presented accommodation for example, or more flexible opening hours and viewing arrangements will benefit both tenants and landlords. Good or improved feedback from tenants will also have an impact on landlord’s decisions about agents, as reputable landlords will be looking for the best service/benefits/fee combination moving forwards.
As an alternative to a simple fee increase agents could look to streamline their operations, those not using technology to save time and money need to consider integrating software into their current systems, where possible, to better manage landlords and tenants. An audit of any inefficiency or possible saving opportunities such as utility bills, vehicle usage, out-sourcing over employment and even premises rent negotiations will all help to improve efficiency and reduce costs within the business as well as hopefully offering a more efficient streamlined system to landlords and tenants alike.
Finally, moving home can be very stressful for tenants with so much to do, agents can look to increase their revenue streams by offering additional services through trusted commercial partnerships; referrals to insurance brokers, utility suppliers or removals companies for example. Letting agents themselves can earn substantial commissions for referrals to a long list of service providers needed when someone is moving home.
Whatever agents do to prepare themselves for the ban, they shouldn’t lose sight of the elements of their business that is important to them, and what their existing client’s value most. Although this is one of the biggest changes to the English lettings industry in recent years, they have been banned in Scotland for the past six years. It is expected that rents will rise more than predicted but if agents do all they can to mitigate any cost increases and improve their efficiency landlords should hopefully see increased benefits from these improvements without a severe price hike they’ll be forced to pass on to tenants.
Find Nicholas Jones Residential at www.nicholasjonesresidential.co.uk,
or for property lettings advice as a landlord or tennant, email lettings@nicholasjonesresidential.co.uk