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Proving renting works without letting agent fees

Ever since Chancellor Philip Hammond delivered the Autumn Statement of 2016, there has been a furore of talks over letting agent fees, whether it’s fair for tenants to pay and how much if so… 

Almost immediately, everybody realised that letting fees aren’t going to magically disappear and that if tenants were to get their way, there was a tough fight ahead. The Tenants’ Voice has been covering closely the debate over letting agent fees.

Break down of fees by some of the largest letting and estate agents in the UK.
Break down of fees by some of the largest letting and estate agents in the UK. Source The Sun

Still no ban on fees, but we’re getting there

The government decided to go down with a full consultation before drafting a bill. Agents spoke fiercely against the ban, as everyone knew they would. Landlords kept shut and hoped it wouldn’t land on their door.

Her Majesty The Queen spoke in favour of tenants and banning letting agent fees in her speech to both Houses of Parliament (June 21st, 2017).

Last November the government published the draft bill, announcing the ban on letting fees, caps on holding deposits and other long-awaited regulations for the property industry. It looked like the win every tenant was waiting for.

We could almost taste the end of letting fees, but this was just a step in a rather extensive legislative process. In fact, last month it was made very clear that the implementation of the ban would happen no earlier than April 2019.

  1. First, Draft Bill Committee has to conduct hearings and consider a long list of evidence before passing their recommendations to the ministers.
  2. Then, the bill needs to be finalised and dragged all the way through Parliament and finally signed a law by The Queen.
  3. And then, the Government would still need a secondary legislation, which has to go a similar route, before the ban could come into effect.

A couple of months ago, we published another piece giving more insight into the viewpoints of agents, landlords and tenants and offering a middle ground solution. More agents than expected agreed that meeting halfway would be the least disruptive solution.

What if we were to ban fees tomorrow ?

Let’s consider a total ban that goes into effect tomorrow. Many if not most agents will look for a way to redirect these costs so they don’t have to burden the loss of income.

One obvious place to look at is landlords, as the obvious recipient of most letting agent services. Landlords have been sitting quietly through this debate, just hoping the fees won’t land on their shoulders.

In a recently published survey by HomeRenter, two important findings highlight just how much landlords are looking to cover the cost of letting fees:

  • Number one on the landlord dissatisfaction list was: “Perceived high fees & poor service provided by letting agencies (52%)”
  • As a general summary, the survey found out that “the majority of landlords (87%) claim they would be happier renting directly to their tenants than via a traditional lettings agent”

So, if letting fees are to land hard on landlords, it’s very perceivable that most landlords would just drop the agent and continue renting directly to tenants.This brings a whole bucket of other problems, which we won’t discuss in this blog post.Let’s just say that the renting industry is better WITH letting agents.

If it’s not tenants, and if it’s not landlords, how do agents fill the profit gap ? Third-party services, perhaps ?

Indeed, on Friday, Property Industry Eye published a blog post, including details from a letter between a Belvoir franchise and a contractor. In the letter, the letting agent instructs the contractor to build in 10% price margins in their services, which the agent would get as a commission.

Now, every savvy renter knows that when a letting agent is pushing a specific contractor for repairs or refurbishment a property, there is likely some profit sharing going on. This is not necessarily bad.

However, if every property service suddenly gets 10% more expensive, at a cost to either landlord or tenant, it becomes a bit of an issue. Furthermore, when the tenancy approaches its end and the deposit dance begins, overcharging becomes a real issue.

We’re not saying every letting agent will go down this path, but inevitably many will try and it’s something both landlords and tenants need to be aware of.

Making it work without letting agent fees

It’s not all bad though. Not every letting agent is scheming behind our backs. Indeed, the purpose of this blog post it to talk about one agent that is making it work without tenant fees a whole year ahead of the law and everybody else.

Yooodle is a fresh, London and Surrey-based, letting agency which doesn’t charge any move-in fees to tenants. Yes, you heard it right, they charge no fees to tenants.

We talked to Yooodle founder and CEO, Benjamin Willmore, about letting agents, fees and renting. Please enjoy the interview below.

Q – The Tenants’ Voice: Yooodle charges no fees to tenants. How does it work?

A – Benjamin Willmore | Woodle: We have streamlined our expenses and optimised the work process to operate at minimum cost.

First, we removed the expensive high-street offices. The footfall for estate agents has seen a massive decline over the years due to the advances in technology, you can find an agent from the comfort of your home.

Second, we do not need huge amounts of staff. We run more effectively with a smaller, well-trained, professional team. Despite our savings, we invest heavily in our staff, through professional training and by breaking that mould of the typical style of an estate agent. With this, we become more engaged in delivering a positive consumer experience. All of us have been or are still tenants, so, we are like-minded people.

Lastly, we have removed the greed. Yes, we need to make a profit as a business but we know our profit will be fair. Paying £300 to move into a property is nothing more than a license to print money which has got way out of control.

The agents themselves are solely to blame. They set the price and as one puts it up, everyone else follows suit. We know the amount of work and cost that goes into the move-in process. It’s nothing more than daylight robbery to make those charges.

Q – The Tenants’ Voice: If it works for you, then it probably could work for everybody else. Do you think agents already have a plan B and just reap profit until the ban gets implemented ?

A – Benjamin Willmore | Woodle: I fear for the bigger agencies as it won’t work for them.

They have built and secured their business around raking in millions of pounds a year from tenant fees. If they were to scrap it, then it would mean job losses.

Yes, they can put the landlord fees up but it will make their offer unattractive compared to smaller agencies like ours. Some smaller agencies will suffer too, as once again that income is relied upon.

They do have a plan B, though. They can sell additional services to tenants and create affiliate networks to earn commissions. This could be repairs, contents insurance, cleaning, and any other property service.

Landlord fees are almost surely going to increase, even if it’s just a fractional increase.

Q – The Tenants’ Voice: Are the rents going up when the ban goes into force ?

A – Benjamin Willmore | Woodle: This could well be possible.

Not only are landlords being squeezed by changes in legislation and tax, but they also may have higher agent fees when the ban comes in. It is documented that a while after the ban came into Scotland rents did increase. If the same happens in England, tenants could end up paying more than what they did in fees.

I think the ban needs to be capped. This way it can manage the marketplace better. Either way, we like our model, as we support tenants.

Q – The Tenants’ Voice: In an industry where rogue landlords and letting agents are hard to deal with, what is your number one tip for tenants ?

A – Benjamin Willmore | Woodle: Do your homework – both on the property and the agency.

Under CPR (client protection regulations), letting agents must inform you of all the details regarding a property prior to you renting it. If you are worried, but want that property, put in a six-month break clause.

Best of all, find the right agency. We make sure tenants know everything we know prior to viewing and at the viewing. This way we are transparent and honest.

About Yooodle:

The service works by charging landlords a one-time fee to get a tenant in their property. Tenants, on their part, pay nothing but a holding deposit, which is contributed to the security deposit when the tenancy begins. Referencing, renewals and other management services come free for tenants.

The only fee tenants may be charged is a check-out inventory, performed by a professional inventory company. This fee is only applied when the landlord has, on their part, paid for a professional check-in inventory.

Tenants can rest assured they are dealing with a professional letting agent that bears multiple industry body memberships including ARLA, NAEA, The Property Ombudsman and Client Money Protection.

Yooodle operates both digitally and in office locations scattered around Greater London, South-East London and Surrey and expands its portfolio of properties and locations at a growing pace.