Landlords hand over as much as a fifth of their rent to letting agencies to look after a property, while tenants have to fork out a further £300 each. So should landlords be ditching the pricey high-street letting agents in favour of a raft of new online alternatives that promise to slash such costs and even axe fees to tenants altogether?
No Agent is the latest firm to launch, claiming it will save a typical landlord £1,600 in the first year, and leave tenants £337 better off. It joins a number of other online players such as Upad, easyProperty, Purplebricks and Rentify.
The charges made by conventional letting agents can be breathtaking. For example, London and south-east agency Foxtons charges landlords 13.2% of the annual rent for finding a tenant, rising to 20.4% if the landlord also wants the agency to manage the property. Then there is a £420 admin fee, £165 to check-in a tenant, £150 for gas and electricity safety certificates (each), plus 12% of the value of any works above £1,000 that need to be done on the property.
Those are the charges that are levied on landlords. Foxtons then charges tenants a separate fee of £420 per property and £165 to organise a tenant check-out at the end of the tenancy. For someone letting a property at £1,000 a month, fully managed by the agency, it means Foxtons will pick up around £3,000 in fees in the first year alone.
Letting agency fees vary markedly around England – and in Scotland fees to tenants are banned. According to David Cox, managing director of the Association of Residential Letting Agents, there are three levels of fees.
The basic is just to find a tenant, handle the vetting and contracts. Typically it’s around 6%-10% of the first year’s rent, or, for a flat, a pre-agreed fee. The second level is to find a tenant and handle the monthly rent collection, usually 8%-12% of the rent. Finally, the full service of tenant finding, collection and management, including repairs, can be as high as 20% of the rent.
Cox says the vast majority of landlords prefer to deal with a conventional high street letting agent, likening them to British Airways versus a no-frills airline. “The landlord is charged one fee and everything is included. The online agents often have what looks like a cheap basic fee, but then they bill you for everything else, such as viewings.”
New regulations – such as the “right to rent” immigration checks – are also encouraging landlords to use traditional agents to ensure they are complying with the law, he says.
But the online agents argue they can do everything a traditional agent does, but at a fraction of the cost. Crucially, they are able to advertise on Rightmove and Zoopla, where nine out of 10 prospective tenants now find a property. Charges start at around £100 for advertising on the major property portals, to around £500-£600 a year for a full property management service, although a menu of charges is not unusual.
For example, No Agent charges a flat fee of £39 a month in London or £29 outside for management. There’s an additional £90 to handle viewings for the first 30 days, £90 for photography, £65 for floor plans and £90 for safety certificates. Tenants are not asked for a penny.
Calum Brannan, the 27-year-old founder of No Agent, says: “The lettings agency market has been overpriced for way too long. For example, we don’t charge for credit checks, but then Experian is almost giving them away. It gives you an idea of the huge mark-ups that traditional letting agents are making.”
But can a landlord really trust an online agent to handle the very human issues of finding tenants and dealing with issues as they arise, such as broken washing machines, or damp building up in the corner of a room?
No Agent says it has a 24-hour call centre for tenants and landlords to ring, with a network of property professionals in every part of the UK who will handle issues as they arise. When it comes to arranging viewings, it promises that someone can be at the landlord’s property the next day to show a prospective tenant around. Equally, it says, landlords are free to handle viewings themselves.Upad is the largest online letting agency, handling around 1,250 lettings a month. It charges £118.80 for its most basic service, which is getting the landlord’s property advertised on Rightmove and Zoopla, through to £598.80 for its full management service, although it won’t handle initial viewings.
Founder James Davis says the key advantage of an online letting agent is that it lets landlords do the bits they want to do, while leaving the agency to pick up the rest. He says that 80% of landlords “self-manage to some degree, and most want to meet the tenants face to face before letting”. He adds that 90% of tenants say they would rather see the landlord at a viewing than the agent. “Our model is less about cutting costs and more about offering a fuller service. We are probably the most expensive of the online agents, but we do a lot more hand-holding for landlords than the others.”
