Nearly one-third of landlords who currently use a letting agent may stop doing so once the fees ban comes in.
The finding emerges in a new report from specialist lender Paragon, based on interviews with over 200 ‘experienced’ landlords.
It shows that 73% of such landlords currently use an agent, but that 30% of these will be discouraged from doing so if fees charged to landlords go up.
John Heron, Paragon managing director of mortgages, said: “In the midst of ongoing turbulence in the private rented sector, landlords have already had to navigate through challenging policy changes, and rethink their strategies accordingly.
“An increase in landlord costs as a result of a ban on tenant fees would be the latest in a succession of challenges and it is unsurprising to learn that a substantial number of landlords might consider altering their approach to letting out their properties in that circumstance.”
The report found that of the 27% of landlords who let directly, most (84%) do not charge any tenant fee.
The report also asked about rental deposits, which are set to be capped at six weeks of rent.
More than two out of three landlords (68%) said that up to two months’ rent was reasonable.
So here’s what I’m thinking. We collect £60k per annum in management commission currently (yep, tiny business). Other revenues force us to be registered for VAT so that £60k becomes £72k. Surely it has to be worth me creating a non-VAT subsidiary or standalone and putting the £72k through that. I’ve effectively increased my charge to the landlord, but only by the VAT level so landlord will in essence still pay the same. We pocket a bit more cash (even with accountant, insurances, TPOS) deducted.
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That won’t work as HMRC will treat them as linked businesses for tax/VAT purposes if one gets all its business from the other and the Directors of both businesses are the same & they trade from the same premises.
We thought about setting up a 2nd business dealing with non property management work eg Legionnaires disease risk assessments, minor repairs , Fire Risk Assessments etc to have 2 businesses below the VAT level , but were advised by Accountants this wasn’t permissible if all the work for the 2nd business came from the letting agency business.
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Plenty of businesses has separate companies for lettings and sales divisions. I’d certainly enquire with your accountant. You can then take advantage of the £3000 NI allowance too for payroll.
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John Heron is a brilliant and seasoned operator so I am sure his comments are off the back well conducted research.
However, he may well think of encouraging landlords not to DIY, as that will only increase the potential for disastrous tenancies, voids, and perhaps repossessions.
Those of us who have been around for a long time and letting over many decades, will understand the wisdom and benefit of advice from decent and competent agents.
I can identify a classic current situation, where the tenant has been so disruptive that the occupants of the other 4 houses in the close are currently seeking an ASBO. That could have been avoided had the landlord used an agent, who would have referenced the tenants last rental !
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