The impending letting fee ban will force agents to re-evaluate their communications strategy. If you're looking for new ways to bolster your revenue whilst remaining competitive, we have the software to help.
Opinion is divided regarding Philip Hammond’s recent Autumn Statement. Declarations from spokespersons from both camps are intensely divisive. Some claim that the UK Government is ‘set on making life as difficult as possible for property investors’, whilst others welcome the impending letting fee ban, with one chief executive of a ’60-strong London agency’ proclaiming that it is a ““…step in the right direction, as it will lead to more transparency and make life difficult for rogue estate agents.””
There is also a level of uncertainty regarding the announcement, as the Property Industry EYE notes: “Scotland introduced a ban on letting fees to tenants in 2012, and four years later there is little consensus on whether this has pushed up rents to cover the increased costs for agents and landlords.” Some are doubtful that the announcement will ultimately help tenants at all, arguing that agents will have no other option than to shift the costs to landlords which some claim will only fuel an increase in rents. For those that condemn the announcement, they also assert that there could potentially be a myriad of problems created that will affect the future of the sector. For example, the Estate Agent Today website quotes one spokesperson as saying that some agencies may be forced to ‘cut back on investment’ within the lettings sector, therefore ‘diminishing customer service delivery’. They add that: ““[w]ithout reputable letting agents fully committed to the sector we will potentially see more lettings back in the hands of unregulated private landlords...leaving tenants with far lower levels of protection than at present…Cut off the income of this sector and it risks creating a race to the bottom in levels of standards.” Some also feel that this move will only serve to discourage current landlords to stay within the market, whilst also serving to put off potential landlords from entering it.
However, responses from support groups are keen to highlight why the ban is necessary, with one chief executive asserting that““[a]ny sensible agency won’t pass on the changes to landlords, due to competition in the sector…[and] having the Government step in to abolish these fees is another example that the industry cannot self-regulate and be fair to consumers.”” They quote another spokesperson from the Residential Landlords Association who states that the Government should have ‘taken steps to improve the transparency of fees charged by agents’ and that they should have ‘forced them to publicise what the fees actually cover’. The Independent (online) seems to support this evidence, noting that “[l]ast year it became a statutory duty for letting agents to publicise fees in advance, but the Letting Fees campaign organised by Generation Rent has found that 14 per cent of agents still do not list their fees publicly.”
There is an argument to contend with then, one that seems to highlight the fact that there is no clear and definitive outline as to what fees agencies are currently charging and, in most cases, what the fees are actually used for. A spokesperson from Citizens Advice added that “”[f]ees have gone up 60 per cent in the last five years with people paying over £300 to letting agents for what is often basic administration, such as checking references and running credits checks .”” However, David Cox, MD of the Association of Residential Letting Agents, counters this statement, noting that “”[m]ost letting agents do not profit from fees…we think [the fee] is fair, reasonable and far from exploitive for the service tenants receive.””
When a ban on letting fees was introduced in Scotland in 2012, it can be argued that some agencies swallowed the bitter pill of the (potentially bad news, depending on which side your opinions fall), and got proactive to ensure that they would recuperate any lost earnings. The EYE received a comment worthy of note from a reader called Scotlandagent80, who noted that their agency bolstered their revenue by “…generating other sources of income through in-house inventories, legionella risk assessments, and PAT tests.”
This is Money.co.uk offer another contentious argument, declaring that ‘landlords have as much right to be angry as tenants over agency letting fees’. They say that landlords ‘pay handsomely for letting and management already’ and that ‘these fees are meant to cover many of the things that some unscrupulous letting agents also charge tenants for’. They argue that ‘lumping extra costs on to landlords will be a high-risk strategy’, and that, in a competitive marketplace, this will only serve to encourage landlords to move agencies, or consider moving to an online agent. They also note that if you:
“[a]sk any long-term landlord…they will tell you that the difficulty is in finding a good letting agent...who takes all the worry of sorting any problems for you off your hands. They will have a network including plumbers, electricians, and handymen or women, who can get things fixed asap, do essential maintenance swiftly and at a fair cost and keep your tenants happy…[M]any landlords stick with letting agents who don’t do a great job for them, overcharge them for maintenance, double-charge them and tenants for the same work, and upset tenants with demands for unfair fees…There are lots of other options out there and this is a great opportunity for good and fair letting agents to win business.”
Some financial experts, published on the Property Wire, are of the opinion that, overall, the ban ‘will not have a significant impact on [a landlord’s] return on investment’, but do see problems for agencies in the future. If landlords do bear the brunt of the extra financial pressure then this will - as the experts note – ‘almost certainly result in them shopping around and trying to find the best price’, so it “…essentially comes down to a trade-off between convenience and costs, and good, reputable, hard-working letting agents…justify[ing] their costs to landlords.”
Reading through the evidence objectively allows us to identify some fundamental problems that have been highlighted:
- There is an alarming lack of communication between agents and their clients.
- Agents will now be forced to explore other revenue-generating opportunities.
- Competition for business will become more aggressive.
- Agencies must be proactive to the situation in order to remain competitive.
Continuing to underestimate the need for effective communication with your clients is detrimental to your business. BriefYourMarket.com can help your agency communicate like never before and ensure that, whatever your opinions of the impending ban are, your agency will have the right software on hand to help retain the business you currently have whilst ensuring that you can effectively generate more. Read our article on the importance of your in-branch and third-party services and discover ways that you can use our software to get your business the results it deserves.
To discuss how our features can help your agency increase your revenue, call one of our expert team today on 0344 800 84 24, or click on the button below to request a callback.