Agency fees when letting a property

[Watis]

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Hi,

Further to my previous post about a family member moving abroad to work, a further question has arisen concerning the letting of their property.

Their preferred letting agent wants 12.5% of the rent for letting, renewal and management. While this is less than the percentage charged by some of the household names that I checked, they want to take the annualised amount from all the first and part of the second month's rent rather than taking 12.5% of each month's rent throughout the year.

My question is to ask whether this is normal? As it seems to me that, once they have their fee for the year, will they be as committed to resolving issues - especially non-payment of rent - if their fee is no longer dependent on keeping the rent rolling in.

TIA,

Watis

[DiamondEcho]

IME [London] that is not normal, and I've not heard of such before where the tenant is paying rent monthly. I have had another iteration of the matter though, where the tenant paid six months rent in advance and the agent took six months commission from month one's rent [whole] and two [part]. I don't recommend it, it just makes statements and accountability vs the agent more remote. In my case it has caused a huge amount of work and anguish since the agent were carrying out all kinds of expensive 'repairs' during a period I was not receiving statements. So when payments were due to resume at month seven I received no net funds for another two months. I thought 6mos in advance would makes things simpler, but it just caused chaos.

But in your situation IMHO it looks a greater risk, and very unreasonable. How do you know the tenant won't give Notice to quit at 4 months, to leave at 6 months? How do you know they'll pay ANY rent beyond that due on signing the lease? Such a situation suits the agent sooo well, they get paid with no risk, great for them!

So I think your conclusion is correct. If you pay a year's commission vs monthly rent, the agent has nil reason to give a damn what happens to your property. I would not have dealings with an agent that had such a policy, or even opportunistically proposed one. Even if you thought you knew and trusted the agent [as I did] it was a nightmare IME, and it's really not a position I'd enter as a starting point with a new agent.

[UncleEbenezer]

Also worth checking how your agent treats (good) tenants. A landlord benefits from keeping a good tenant; an agent profits from churn. It may not be easy to find out if an agent bullies tenants into wanting to move on, but you can check that they're not charging outrageous fees, either up-front or the kind of renewal fee some agents try on every six months or year.

[MyNameIsUrl]

12.5% is probably the top end of normal - in a high-rent area I would hope to shave this down to 11.5 or maybe even a bit nearer to 10%.

Taking the whole year's fees up front is not normal; it is amazing how agents can think up new ways to worsen the service they provide to customers.

I have a good agent and they are worth the cost if you can find one - I suggest a bit of mystery shopping, posing as a prospective tenant. See if you can get one to phone you back as a start.

[midnightcatprowl]

I've never been a landlord but I am one of the Directors of a small estate where a majority of the houses now have tenants rather than home owners so you do get to see/hear about some of the things which go on. I have had experience of having tenancies of commercial properties when I was running a business and got an insight there into the things which can happen when intermediaries are involved.

My comments would be:

the average agent (I'm sure there are good ones I'm just talking average here) does nothing to earn their money except at the start and finish of tenancies;

agents as, someone else has said, do benefit from 'churn' whether the tenant is good or bad, while by and large landlords benefit from good tenants who stay;

agents have a unique ability to pursue their own interests to the cost of the landlord and the tenant. My last commercial tenancy almost never happened because of certain issues where the agent simply acted as a brick wall. Fortunately the landlord - who was getting desperate - by-passed them and we were able to settle everything to our mutual satisfaction within a 20 minute phone call and maintained a good working relationship over the next 12 years, the agent having been given the boot.

I'd say not only be extremely suspicious of costs and how costs are organised - and walk away if necessary, after all there are lots more agents out there. I'd also say that if you can't manage and supervise your own property then, even if you live at a distance, you will at least have to manage and supervise the agent.

[didds]

Its been almost twenty years since I last rented,. We rented half a farm house (suitably divided up into two properties) from a farmer and his wife. they were lovely people, who became friends. But they used an agency to keep things simple for them. I couldn't say what % the agency was taking

However I do recall a huge bone of contention was the re-contract fees. Given this was the latter 90s ... I am sure this was at least £50 and possibly £100 every six months. I queried this and the agency gave me some guff about how each contract had to be individually drawn up and checked by their legal department and was a reflection of that cost. I countered by telling them the new contract was word for word except for the blanks for dates and names as the last one (and then last two 6 months later). I said I could see no individual work here and certainly not on a repeated basis, and that I strongly thought this was a standard computerised contract that was printed off by a office clerk. I just got the same mantra. They had us by the short and curlies basically, though I voiced my concerns with our landlords - easy as they were next door of course.

After two renewals - the landlords were getting the same charge for renewed contracts as well! - the landlords thankfully sacked the agents and we did everything directly. As they were unsure of what to do, I just photocopied the previous contracts and we both signed the photocopies.

More recently Ive acted as guarantor for my son's uni letting. The incompetence of his agents is to be seen to be believed.

I wouldn't trust letting agents with a barge pole.

didds

[UncleEbenezer]

However I do recall a huge bone of contention was the re-contract fees. Given this was the latter 90s ... I am sure this was at least £50 and possibly £100 every six months. I queried this and the agency gave me some guff about how each contract had to be individually drawn up and checked by their legal department and was a reflection of that cost.
didds

That's what I was referring to above. Note that even as you paraphrase it, you've fallen into the trap: "each contract" implies that you keep creating new contracts, or at least doing something active to renew a contract.

The simple answer is that when a regular rental ends, it automatically becomes a rolling contract. Neither side loses any kind of legal protection: the only difference is that instead of a fixed initial term, you can give notice. No renewal required from anyone. An agent who pushes you into renewing is acting for the benefit neither of landlord nor tenant.

[chas49]

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Moved to Property board as now off-topic for DAK (chas49)

[Arborbridge]

the only difference is that instead of a fixed initial term, you can give notice. No renewal required from anyone. An agent who pushes you into renewing is acting for the benefit neither of landlord nor tenant.

Just to note: some people might prefer another fixed term. If that were the case, it would be unfair to say the agent isn't acting in the best interests of either party - it may be what they want.

Having said that, I concur with the view that agents generally are playing fast and loose with both landlords and tenants, abusing their position. If one wants to renew for a further fixed term, it is very simple and inexpensive to do so using downloadable contracts from Oyez. Go for the dearer version rather than the short cheapo job. It's either the "AGREE23" or "AGREE24" . There is space to fill in any special conditions of your own, or add clauses to make it compatible with the original agent's contract with the existing tenants would be used to.

I've heard that the excuse for the charge is often "we have to re-protect the deposit" (even when going over to a rolling SPT)but protecting the deposit can be done without charge through the Deposit Protection Service.

Arb.

[RossP]

I have recently let out a flat in SE London and as I will not be living anywhere nearby for the foreseeable future decided to go with an agent. Some of the high street chains were quoting up to 18% for a fully managed service. With a little negotiation (and coming into their system via an out of London branch) I was able to negotiate a 12% fee. That fee was split 8%/4% for tenancy finding / on-going maintenance and they did require the 8% upfront, which came out of the firs two months rent. I wasn't overly happy with this but it did seem to the norm with other agents in the area.

So far I don't think they have been great value, as I have had to push back against initial quotes for maintenance work multiple times and they haven't exactly gone out of their way to ensure either a speedy or cheap resolution to tenant requests. I would like to get rid of them at the end of this tenancy but I am not sure about managing it myself given that I am over 3 hours drive away now. I am going to consider using the property management company who manage the wider flat complex as at least they should be on site regularly and therefore respond quicker to any tenant requests.

Ross

[DiamondEcho]

I have had to push back against initial quotes for maintenance work multiple times and they haven't exactly gone out of their way to ensure either a speedy or cheap resolution to tenant requests.

Apparently it's not uncommon for the agent to be getting kick-backs from builders/engineers/handymen etc. I've had this problem a couple of times over the years. The works are frequent, expensive, and if I nominate a person/company to do the work it's par for the course for the agent to find my nominee 'unreliable', or 'didn't show up' etc etc. Some of these nominees have been tradesmen I've known for years, and come to trust, so I can ask them for their version of the agent's claimed events. 'They didn't have the keys'... 'Still haven't paid my last two bills from 3 and 6 months ago', and so on; agent's don't seem to like using people who don't play the commission game.

I'm currently seeing another iteration of this. I'm being told major works are planned including major improvements of a capital/asset nature. I don't know which owners want them, if any, the agent has just said they're happening and how would we like the detail of them executed. I nominated three companies to do one major element of these works, they've ignored those and still only produced one quote from someone I know is 'connected' to one of the owners.

Agents these days seem to be increasingly creative in how they generate income, both declared and off the books. I've had two instances (different agents and properties) where the agents have declared they intend to start raising a sinking-fund for service charges. Great for them, loads of our money sitting in their bank account that they can then hose through whilst skimming kick-backs. In both cases their proposal was made despite being contrary to how annual service charge funds must be demanded/raised in the respective leases.

[JonE]

I am going to consider using the property management company who manage the wider flat complex

As illustrated by DiamondEcho's post, there is sometimes a lack of clarity about whether one is talking of letting agents (possible ARLA membership) or Managing Agents (possible ARMA membership).

I would not be comfortable using a managing agent for my own letting purposes. That agent is looking after the freeholder's interests (even though paid by the leaseholders) so a conflict of interest could arise if also looking after a leaseholder's interests in a different context/capacity.

There again, I wouldn't be at all comfortable using a letting agent as they are usually only looking after their own business interests. That applied even when I had SW-London flats - 250 miles from my home at that time.

Cheers!