Leading property software services firm, Eurolink, last week gathered representatives from 12 of the UK’s leading agency firms to debate the government’s proposed ban on lettings fees.
The debate was held in Eurolink’s new cutting edge headquarters in the exclusive technology hub in London’s Kings Cross, alongside Google’s headquarters.
Here, we share some of the key points raised.
Many guests were shocked about Chancellor Philip Hammond’s decision to announce a proposed on ban lettings fees in his inaugural Autumn Statement in November.
There was great concern that agents will be forced to undertake tenant-related work for free.
Many guests expressed a fear that the ban, if implemented, would push up rents.
However, research carried out by housing charity, Shelter, in 2013 found that just 2% of landlords increased rents because of the fee ban.
One guest claimed that upfront lettings fees represent just 5-10% of Scottish agents’ fees, hence why the ban has had a minimal impact on their businesses and the Scottish market at large.
This was not the case for some of our guests, who are volume operators reliant on the revenue stream generated by tenant fees to bolster their income. One London-based agent suggested that such firms, typically located outside of the capital, are therefore likely to be hardest hit by the ban.
Either way, the consensus was that the ban is inevitable.
Assuming this is the case, one agent suggested that lettings agents’ time would be better spent devising ways in which to fend off the threat posed by online and hybrid agents, which are growing in numbers, rather than agonising over lost fees and how to plug their shortfall.
Cost to the business
The cost of the ban to our guests was wide-ranging, from £85,000 to over £850,000 of income per year.
London agents agreed that they and larger agencies across the country would probably be able to absorb the cost.
Possible outcomes of the ban
Increased landlord fees.
- Staff redundancies.
- Drawdowns on war chests.
- Increased focus on property management services.
- Increased property management service value.
Steps already taken/under consideration by agents
Pick and mix lettings and property management services for landlords.
- Self-service landlord portals.
- Increased tenant fees until the ban comes in.
- Cost base review.
- Sharpening of negotiation skills and practices.
- Automated tenancy agreements built into agency software.
- Removal of break clauses within the first 12 months of a tenancy agreement.
- Encouraging tenants to move.
- Increased marketing budget and social media strategy review.
- Freezed business investment.
Guests also mulled the possibility of creating new requirements for tenants to source their own credit checks and references, to minimise the level of tenant-related work that they would have to undertake for free if the ban was implemented.
One of the greatest challenges raised by guests was that of quality control around agents’ branding if any form of self-service was introduced.
Guests raised concerns about the quality of landlords’ photography, and the quality and source of referencing and credit checks sourced by tenants themselves.
One agent expressed fears about a rise in criminal activity if the latter became a reality.
Meanwhile, guests agreed that landlords would be reluctant to pay higher fees and certainly object to footing the bill of tenant services such as credit checks, with some guests questioning whether or not landlords would bother with checks at all if they had to pay for them, hence the suggested rise of criminal activity.
Any rise in landlord fees would, guests feared, result in higher rental prices, which would impact the ease with which properties are let, despite aforementioned evidence to the contrary.
This is the last thing wanted by agents in London where a glut of rental stock has slowed down the market and put downward pressure on rents.
Some guests went on to question the ease with which agents could prove their worth to justify existing or increased landlord fees given that most landlord clients just don’t understand, or indeed care, what their agents do for them; most landlords simply want their properties let in the quickest possible time period and for the most competitive fee.
But another guest insisted that agents who truly believe in what they do and the service they offer won’t have a problem proving their worth, irrespective of how high their fees may be.
But it’s not all doom and gloom – there were plenty of opportunities discussed during the roundtable debate.
Acquire lettings businesses from agents who fail to survive the fallout from the ban.
- Review cost base and any duplication, particularly around fees.
- Sharpen negotiating skills and/or customer service standards.
- Self-promotion (i.e. remind people why you’re great and exactly what they’re paying you for).
- Create new revenue streams through initiatives such as build to rent and by monetising client data (e.g. earn kickbacks from third providers such as Virgin Media, utility provider, Homeshift, and Rentshield Direct).
Slicker software functionality was also discussed, with guests calling on Eurolink to build on its highly-prized third party service integration capabilities, such as the integration it provides with apps such as DocuSign and tenant referencing provider, Van Mildert.
Serious consideration needs to be given to how agents will communicate the fee ban to both landlords and tenants and reflect any ban in their terms of business.
One agent said that she’s started talking to landlords about the proposed ban and the likely changes, to help prepare them for any future fee increases.
Others revealed that they’d started to review their terms of business.
The consensus among guests was that it’s too early to tell what the ban will include and how that will impact agents’ businesses until, and indeed if, it’s implemented.
Guests also agreed that lettings agents need to be lobbying as many influential individuals and groups as possible to help block the ban.
Most guests suggested that a single voice/industry body is what’s required for agents to be heard, but the jury’s out on whether or not the Association of Residential Letting Agents is capable of providing that voice.
One agent suggested that agents lobby local MPs, since they will have the greatest influence on the possible implementation and extent of the ban.
Others suggested that agents should contact as many bodies and contacts as possible, because the more noise they make, the better (consider ARLA, Shelter, local MPs etc.)
Let’s get shouting!