We must fight to overturn ‘monstrous’ ban on tenants’ fees, says Spicerhart boss Paul Smith

As if our industry had not already been in trouble enough, the Government has blasted us with both barrels between the eyes by introducing a ban on lettings agents’ tenant fees within the Autumn Statement – even if they are now saying it might not come in until 2018.

So much for listening to the profession. Do the powers that be have their hands over their ears or are we, as an industry, failing to get our points across?

We must not back down, we must not rest on our laurels. We all need to stand up and be counted or agencies will go bust off the back of this ill-conceived announcement.

ARLA needs to come out fighting and not acquiesce quietly to this monstrous decision which will affect all our livelihoods.

I, for one, am already lobbying at the highest levels within Cabinet while members of my team sit on important task-forces such as the Fair Fees Forum.

What are you doing to fight your corner? Have you lobbied your local MP to ensure your voice is heard?

Because if we don’t, as everyone is saying, the main losers will be the tenants themselves. It is likely that the very people the Government hoped to protect will end up paying more in increased rent. The cost of administering references and inventories that tenant fees would have previously covered are now likely to be passed on to the tenant through their rent.

This decision is in real danger of driving more tenants towards rogue landlords.

We also need to understand how you distinguish between a fee and a legitimate and fair charge for a service provided. For example, what if a Tenancy Agreement needs changing because one person moves out of a shared house and another moves in? Who pays for our time to sort out the return of one deposit and setting up another? What happens if someone loses their keys and needs another set cutting or letting in late at night – who pays for that?

Isn’t it ironic that the Home Office wants letting agents to enforce the Immigration Act and yet wants to take away our ability to charge the extra cost!

The other losers are, of course, the letting agencies – some of whom are already preparing to throw in the towel. Small one-man bands may survive but the big corporates aren’t interested in running a loss-making venture. Look what happened to their share prices after the announcement!

Millions of pounds were wiped off the value of Foxtons, Countrywide, LSL and Winkworth. Foxtons was down at one stage by 16%! Will some of these businesses have to consolidate?

This decision is hardly going to help increase competition within the industry as a whole, at a time when we are contending with Brexit uncertainty, low fees, low margins, Stamp Duty changes, low entry to the industry and way too many agents chasing market share.

All of this will have an impact on customer service. I have long called for regulation and licensing in estate agency; if ever there was a time we needed it, it’s now!

We need to help legislators with their understanding of the processes and technicalities involved in moving a tenant into their new home and the paralegal role that letting agents undertake. Otherwise landlords are going to make people pay a higher price and Generation Rent are going to become firmly ensconced within the market and never be able to save the deposit to move out and on to the housing ladder.

An unintended home goal, if ever there was one, Mr Hammond.

 

Come on portals, do your bit for the industry!

So where are the portals in our hour of need? Helping us out by reducing fees? Or even introducing a fee holiday?

No, of course not, they are continuing to put up our fees! Just look at how much Rightmove have put up their fees, year on year, over the last 16 years since they started.

As for Zoopla’s announcement last week of £77m profit on record revenues of almost £200, just remember whose money that was – ours!

I’d like to remind the portals who created their extreme wealth. And how they use our data for their own financial means, selling information about home movers to other industries.

While the portals get ever richer, the agents are getting poorer. Many are not going to survive this coming year.

It’s time that portals gave us all a discount to see us through the rough times – before they out-price themselves.

What will the future look like from a marketing perspective? Will social media outpace the portals? Or is social media a waste of time? Will we be able to afford Google Ads?

Will local newspapers even survive, given that none of them have a national digital strategy and don’t understand how to work with estate agents to deliver leads?

If only all agents would take the leap of faith and switch to OnTheMarket, we could be in control of our own destiny.

Instead, estate agents are being held over a very big barrel – while a high proportion of property porn addicts surf the portals, bouncing off with no intention of buying, costing us a small fortune with no signs of things getting better.

 

Light touch, less tech

Our world has become so tech heavy that we are in danger of losing our personal touch.

Traditional estate agency was about talking to people, not emailing and texting. Your personality was able to shine through. People bought people.

Now, customers often have no idea who they are dealing with when they are buying a property, particularly if using an internet agency. They’re told they are dealing with a ‘local’ property expert – but what exactly is that? We need to come up with a definition!

Can someone who has to travel an hour away to value a property be deemed to be ‘local’? Or do people really believe when they are on the phone to someone 300 miles away they are talking to someone who knows their local area?

Let’s get out there more and show the world we mean business.

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29 Comments

  1. The Outsider

    A very passionate call to arms.  Perhaps if you were so fervent over the past few years in the industry having fair, appropriate and in some instances capped fees then you wouldn’t be needing to write an opinion piece like this?

     

    You also need to stop bringing up On The Market on these articles.  It serves no purpose but makes you look like a child having a tantrum because none of the other kids will come and play with him.

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  2. smile please

    Maybe if some estate agents did not take the pi22 with fees in the first place Paul we would not find ourselves in this predicament.

     

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    1. Ding Dong

      agree Smile

      if anyone wants to see why this has happened, take a look at the Romans fee structure…although most agents in that neck of the words take the mickey

       

      £499 admin fee (one person)

      £199 if you want another tenant referenced

      inventory charge minimum £150

      move in Saturday £60

      plus a ridiculous renewal fee

      letting agent fee for two people who work to move in on a Saturday about £1000

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      1. propertyguru51

        Im a reading based agent and yes Romans are crazy with there fees, but Haart are no better and its people like Paul Smith who have caused this to fill there greedy pockets and pay there staff nothing, its proberly why everyone i knew from when i worked at Haart have jumped ship as its a sinking company.

        Change of Sharer Fee

        £330 incl. VAT£78 incl. VAT for each additional tenant

        Haart fee above just for a change off sharer, surly this is a joke off a price

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  3. Roger.

    Great article… my support all the way! As far as “The Outsider” and “Smile Please” isn’t it about time you types grew up? Let’s stop this age old routine of bickering amongst fellow colleagues and for once stick together, show some compassion and professionalism and perhaps it may well benefit us all??

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    1. smile please

      Roger.

      I is hard to take anything Paul says seriously.

      He seems to want to aline himself and talk about the greater good when it’s for his benefit.

       

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  4. AndrewOverman

    What a passionate article. Perhaps if your local office would list based on service, they’d stop trying to drive fees down to 1% and less. Pot, kettle and black, Mr Smith. If you want to increase profits (and let’s face it we all do), how about trading your valuers / managers correctly! That’d be a start.

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    1. AndrewOverman

      *training

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  5. AgencyInsider

    Characterising the ban as ‘monstrous’ is something that the likes of Shelter/GenRent and the tabloids will use as stick to beat us all with.

    Be passionate by all means Mr Smith. But don’t hand your opponents an own goal.

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  6. pierce

    Campaign all you like with a call to arms, but it will be a wasted effort. Look at the clause 24 battle, so bravely fought and so sadly lost.

    Why don’t we all wait to see what the legislation will be? I am convinced in my own mind that this will take effect by April 2017 and not in 2018 as all the experts appear to be saying.

    In case none of you have worked it out yet, it won’t be as bad as you think it will be and I have seen a way to work with it and not against it. My plan is already set in stone 😉

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  7. FromTheHip64

    “We must not back down, we must not rest on our laurels. We all need to stand up and be counted or agencies will go bust off the back of this ill-conceived announcement.”

    We must continue to shy away from charging our client (the landlord) and continue to charge outrageous fees to prospective tenants.

    When is the lettings industry going to get real. Charge your client….end of.

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    1. Votta583

      FROMTHEHIP64

      How many more times are you going to say “charge the client”?????

      The client will not pay I’ve had these conversations with several already and they’ve already stated they will not pay!!!!

      When was the last time you ever listed a house ???

      Roger was spot on with his comments,  when are people going to finally get this  and stop responding with short sighted inexperienced comments.

      Come spend a quarter in my area   Have a look at our business overheads let’s see if your comments still remain the same.  I Guarantee they won’t. Abolish fees and you set into motion a ripple effect. Poor poor tenants

       

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      1. FromTheHip64

        Lots…that’s what you do in sales….charge the client. If he doesn’t want to pay then he doesn’t get the service. Same as in any other industry in the world.

        Company Director to recruitment consultant…”I’d like you to find me a new IT Manager”……    I don’t need to carry on, you know where I’m going.

        And I list houses every day. I’m an estate agent….that’s what I do. And I always charge the seller, not the buyer.

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    2. smile please

      So given that we do numerous viewers for tenants. Offer advice. Take phone calls. Deal with issues.  Provide a legal, safe and nice home for them.

      You do not consider tenants “clients” of letting agents?

      Show me another profession where somebody gets upwards of 50 hours service a year for free?

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      1. Ding Dong

        but that is what the landlord is paying you for?  To look after the property and their customer

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        1. smile please

          Sorry Ding Dong.

          But spending hours looking round numerous properties (and possibly not renting through us) is not the landlords cost to cover.

          The fact that renters have little or no idea how to rent (the government make us give them a booklet to cover the basic’s which we need to print) is again not the landlords cost to cover.

          Given that you get endless calls regarding how to switch on boilers, cookers open doors DESPITE numerous instructions left (they are too lazy to read) is not a cost for landlords to cover.

          The fact that tenants have no idea how much they or their guarantor can afford to rent (despite it being on 99% or letting agents websites) and we have to do the calculation for them – The landlord should not cover.

          Given that sadly a high number of tenants either do not know their credit file or lie. Or are not employed when they say they are is not fair a landlord should cover the referencing fee.

          When you have a problem tenant that does not pay the rent and needs to be evicted, why should the landlord pay?

          All of the above and numerous others i have neglected are part covered by the tenant for the service they recieve. Letting agents ARE a business not a charity.

          If they do not like it rent through gumtree or the local facebook page – Oh thats right the properties have rogue landlords.

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          1. Ding Dong

            Fair points as always Smile but IMHO: (and for a balance view from a tenant perspective)

            viewings – you do not charge a purchaser for viewing a property.  How many industries charge for viewing a service or good.  Surely if the landlord wants his property let, then he needs to understand that viewings are part of that service.  I am pretty sure your let only and fully managed service, will state viewings are included?

            The landlord is obligated to provide the how to rent booklet. In theory you don’t need to provide it unless you are serving a section 21 notice.

            Repairs/manuals etc…if I rent a property surely it is good practice to physically move people in and show them how to use appliances etc and where the stopcock is located.  Scary how may agents I have worked with, have no property contact beyond giving the tenant a set of keys.

            Rent affordability, what cost is incurred for doing a quick calculation?

            Rent referencing = the landlord requires the referencing not the tenant. It is not the tenant that benefits from referencing. You can actually download credit scores for free now, so the cost should be minimal and no where near the £50 or £60 I see for a tenant reference

            Eviction, the tenant is the landlords, not the agent.  Why should the cost of eviction be factored into tenant fees. The law allows for judges to award court costs to the landlord. As a good tenant, why should I pay fees for the bad ones?

            I totally agree about a letting agent being a business, but when I started in 1996, we charged 15% to the landlord and zero to the tenant.  (that is how most agents worked in those days unless I am mistaken)

            What has changed between then and now?

            more letting agents have appeared and there has been a race to the bottom in fees and it has been so much easier to charge tenants.

             

             

             

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            1. smile please

              I think we need to disagree on this one.

              I think we should be well within our rights to charge circa £300 to a tenant. The excessive £1000 should be outlawed.

              As for viewings, if a do 20 viewings on a house for sale i make from the seller a few thousand pounds. Through a let i am lucky to make a few hundred pounds.

              15% use to be the norm, today its 7 – 8%

              I am the first to admit i hate lettings, it was only through discussion with owners on here i launched earlier this year.

              All my fears are true, its a horrid business to be in, it really is. I am just thankful i have a good team in place i do not need to get involved.

              The cost involved to run a lettings firm, legally and ethically are massive. We need to be able to charge a modest fee from tenants to provide a service.

              you are looking at about 8 – 10k per month – If the average let produces £85 per month you need 125 properties under management to break even.

              All shelter, generation rent other like yourselves are doing is pushing individuals to a cheap internet option with no support, no service and opening up a potential minefield of problems.

              Let me give you a perfect example:

              We had a tenant (rightly) complain because the boiler was not working properly, heating and hot water was not coming through as it should. Landlord did not want us to send somebody round because he had just had boiler installed 4 months ago and was under warranty.

              Instead he wanted to send round the original installer. BUT the installer could not be contacted by either him or ourselves. This continued for a week (the whole time tenants without heating and hot water)

              We said we could not wait any longer and got our contractor out to fix it. Landlord was livid! as it cost him a massive £75!

              If the tenant had rented through an online agent chances are they would still be waiting.

              Abolishing fees will just invite more unwanted landlords to the market, checks will not be made, issues not sorted and tenants will suffer.

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    3. pierce

      No-one has said that the fees charged by some bigger (and not so bigger) agents are not expensive or even outrageous, but I had a gas boiler fitted on saturday and it cost me £450 without materials for half a days work and he never even filled the ****** great hole where the old flue was or tidy up after him. How can that cost be justified?? I suppose you’re going to say they have to be qualified and registered, well guess what, most agents are also qualified and by law have to be registered with a redress scheme, all of which costs money.

      I charge over £100 lees than that for two tenants, to be provided with safe and comfortable home and if you bought a house how much would it cost you in fees to buy the property and maintain while you live there?

       

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  8. Toddy

    A well written piece, although I was slow to twig that an OTM reference was coming! It is perhaps though their opportunity to steal a march on RM and Z. That said, do we all really believe that we are going for a ‘hard brexit’ when it comes to a fees ban!? There will be plenty of legal wrangles and changes of strategy before a fees ban comes in. Another governmental farce on the cards? I think so.

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  9. Ding Dong

    How can you take an article seriously when he states that the main losers will be the tenants but also claim letting agents will lose out as well?

    if tenants are to be the main losers, than logic dictates the other two parties will hardly be affected.  In fact, if you took the increase in rent which a lot of people claim, then letting agents and landlords will be winners in the long run.

    We are having this argument in our office and I believe the industry will see a further race to the bottom in terms of service and fees.  I think those who believe they are clever, will try and make money from the landlord via the back door i.e. larger kick backs from contractors whilst some agents will probably dip into their deposit funds to keep going and we will see more agents disappearing,

    The fittest, the most proactive and genuine will survive.  Is that so bad?

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  10. Property Paddy

    Dear Mr Smith et all,

    Do you not think this government and probably Westminster as a whole have little or no regard for our industry?

    Today they removed letting fees for tenants.

    Tomorrow, will it be our sales fees? Landlord fees ?

    The winds of change are upon us. Yes we need regulation to protect the vulnerable (& gullible) but I would have thought our industry is the perfect example of a free market economy, decentralised and highly competitive. Whereas the utilities, having been privatised. do not even come close.

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  11. James

    I can’t help but feel the horse has already bolted. It’s a shame all of the big players in our industry weren’t pro active prior to this government decision.

    Easy to know why though….it’s because the bigger players have been the main culprits. It’s certainly been very quiet from the likes of Foxtons, Romans and Townends on this subject?

    That’s simply because profits to shareholders are far more important than ‘fairness’ and ‘service’. Hang on a minute….isn’t this the case in every industry and in every walk of life nowadays?

    Just hope the government is going to follow through with their moral crusade in the city, banking, ultiities, the legal profession, pension companies, corporate directors salaries…the list is endless.

    Somehow I doubt it….

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    1. Ding Dong

      Agree James, especially having worked for one of the companies you mention,

      I think the issue here is about the tenant having the inability to shop around unlike the landlord

      i know a couple of landlords who insisted no fees were charged on their tenant….letting director agreed and did no hike up the landlord fee either

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  12. RichardHill61

    Last year, the first thing the ‘semi’ corporate agent, that brought my business, did was hike up the tenant admins by 50%!

    What do SpicerHart charge?

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    1. smile please

      Its online Richard,

      Look at one of their brands such as Felicity J Lord

      You will have to hunt but they are there. For a couple a full check in is not cheap.

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  13. Oldtimer

    “Small one-man bands may survive but the big corporates aren’t interested in running a loss-making venture.”

    Bring it on I could handle more business and profitably and our fees are sub £100 now .

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  14. PeeBee

    “So where are the portals in our hour of need? Helping us out by reducing fees? Or even introducing a fee holiday?”

    It’s time that portals gave us all a discount to see us through the rough times”

    Houston – we have a problem. Major Smith seems to be hallucinating.  Talking gibberish.  Can’t differentiate wildest fiction from remotest possibility of fact.

    “If only all agents would take the leap of faith and switch to OnTheMarket…”

    Sorry – because…?

    Is it because they are currently giving their existing fully paid-up Gold/Silver Members a “fee holiday”?

    Or because they are “reducing fees” to their loyal customers, maybe?

    I don’t see Mr Smith’s company ditching the ‘other portal’ in order to see themselves through the rough times – does anyone else?

    The savings across the brands would be phenomenal.

    Is there the slightest potential of that happening?

    Not on your Nelly.

    Just thickly spread ******** – covering a few of the narrower cracks in the argument.  Complete, unadulterated MDT.

    Planet Earth to Paul Smith… come in, Paul Smith…

    Nope… nothing.

    Houston – you can stand down – we no longer have a problem here you can assist with.

    He’s too far gone.

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  15. propertyguru51

    ‘As for Zoopla’s announcement last week of £77m profit on record revenues of almost £200, just remember whose money that was – ours!’- well Haart did not pay anything as they are OTM

    Shut up Paul Smith your company is the real reason for the ban on fees Haart are known as the cowboys who rip people off, also why would Z listen to Paul when he is a part owner off OTM (something not everyone knows) and he has not paid anything to Z for years as he is OTM and RM, Paul your ship is sinking thats why all the best people have left Haart

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