If your agency is managing landlord portfolios, you’ll need to consider what services to offer and how much to charge. You’ll also need to consider how the Tenant Fees Act 2019 affects what you can charge tenants; here’s what to bear in mind.
What services do landlords pay for?
Landlords typically turn to letting agencies for:
Tenant finding services
Your agency will be responsible for advertising a landlord’s property and showing prospective tenants around. If you offer this service, landlords will usually expect you to:
- manage the tenant referencing process;
- arrange and formalise the tenancy agreement;
- collect the tenancy deposit and register it with a government deposit scheme;
- collect the first month’s rent;
- organise the check-in process and provide an inventory.
Tenant finding plus rent collection services
This package would usually include everything on offer in your tenant finding service but with the addition of collecting rent each month as well.
Full management services
This is typically the most comprehensive package you’ll offer. If you’re providing this, landlords will generally expect you to carry out any landlord responsibilities. For example, arranging repairs and organising gas safety and electrical appliance checks. You can also enhance this package by offering additional services, such as rent guarantee insurance.
What are letting agents responsible for?
Having a clear set of services can help you streamline your admin, but, what you offer may vary from landlord to landlord depending on their expectations and time. You’ll also need to consider what services and packages other letting agencies in your area are offering.
Fundamentally, you’re only responsible for what a landlord contracts you to do. It’s worth remembering that the ultimate responsibility for tenants usually lies with the landlord. For example, if you forget to arrange an electrical safety inspection or fail to protect the tenancy deposit in a government approved scheme, the landlord can still be held liable. Just remember that if this happens, your landlord could sue you if they’ve paid you to fully manage the property on their behalf.
Who pays for repairs if we manage a property?
You may have a list of preferred contractors, but landlords will be responsible for repair costs.
How much should we charge landlords?
Fees will depend on your local market, so consider what’s being offered elsewhere. If your agency is in a particularly competitive area, you could add value to your packages by bolting on additional services or offering a discount for each additional property a landlord asks you to help with.
Typical fees you can expect to charge:
- Tenant finding – this is the most varied of all the fees you can charge; some firms ask for a one-off fee (between £750-£1,500). Others will ask for a fee equivalent to two or four weeks’ rent or a percentage of the monthly rent (ranging from 4% to 13%).
- Rent collection – these fees are normally a proportion of the rent collected, often between 5% and 10%.
- Full management – this will usually be the most expensive package you charge and is usually up to 15% of the monthly rent. An agency can charge as much as 20% in larger cities, such as London.
What is the letting agent fees ban?
Since the Tenant Fees Act 2019, some fees have been banned. The only items you’re allowed to charge are known as permitted payments, including:
- Monthly rent
- A refundable tenancy deposit (capped at five weeks’ rent or six weeks if the annual rent exceeds £50,000)
- A refundable holding deposit (capped at one week’s rent)
- Payments to change the tenancy agreement (if requested by the tenant, capped at £50)
- Payments related to ending the tenancy early
- Payments for utilities, communication services, TV licences and Council Tax (if not included in the rent)
- Interest for late payment of rent (when 14 days in arrears or more, capped at the Bank of England base rate plus 3%)
- A fee for replacing keys or security devices that allow access to a property
Prohibited payments are not allowed – in the past, these were additional fees you may have passed on to tenants. Examples include viewing fees and check-in and check-out fees.
Asking for a prohibited payment can lead to a fine of £5,000 for a first offence and penalties of up to £30,000 – or even criminal prosecution – for subsequent offences.
Helping you to support landlords
Renting out property has become more complex in recent years, and even experienced landlords are likely to need guidance. In addition to keeping up to date with the latest news, you can help landlords by offering additional services such as rent guarantee and landlord insurance. To find out more about our managed service options, contact a member of the team on 01603 649727.
Information provided in this article was correct at the time of publication. This article is intended as a guide only. Please note that legislation does change, it is always best to check the most up to date guidance on gov.uk.
