So. What’s coming down the track for the housing market in 2017, and what is the industry gearing up to do about it?
And, as important, what are the industry organisations going to do to ensure their own houses are in order?
We know that so-called agent’s fees – in reality excessive mark-ups on credit referencing, inventories and check-outs, and ridiculous prices charged for tenancy agreements that are not even tailored for individual properties and circumstances – are all destined for the chop, primarily as a penalty for excess.
There is not much the professional bodies can do about that except, as well as reining in the culture of mark-ups, they also can make sure that charges are not merely passed on through the landlord to the tenant through higher rents.
Having done that urgently, these organisations might then have a case to negotiate with government to allow a fair charging method to cover external costs such as credit referencing or inventories.
Agents will have lost the battle over excessive charging for tenancy agreements. The cost of printing ready-made agreements will have to be seen to be covered by commission charged. An Agreement can no longer be allowed to be an extra charge passed on through the landlord to the tenant. Not if the letting industry is to maintain public confidence.
This, demonstrably, means total transparency for all charges and commissions to landlord or tenant. And that is for the professional bodies to monitor and enforce.
Put simply – everyone, regulator, professional body, agent, landlord and tenant, must recognise and expect agents to perform their services in return for the commission earned. Market forces will then regulate both commission and rent, so protecting the public.
But it is not just a matter of putting honesty and ethics at the top of the agenda for 2017. The fight for a well-organised housing market must also be taken to government over property taxes, the highest in the developed world.
The concept of treating private landlords differently from those who have incorporated when allowing costs against profit is plainly iniquitous.
It makes no more sense than it would to tax sole traders more than limited liability companies in any other business or profession. Costs incurred doing a job are costs for tax purposes. To charge private landlords – sole traders – more than landlords who have incorporated is plainly wrong.
The professional bodies should spend this year (and beyond) fighting this by every means possible including putting the case that the private landlord is, in fact, key to the health of the housing market as whole.
This has not been put across to government, the media or the consumer. So far, the tenants’ pressure groups have had it all their own way.
And the fight must be taken against the most absurd tax of all. To penalise people for buying a second home with a surcharge on Stamp Duty, particularly in coastal towns and villages and rural hamlets, some of the most economically and aspirationally deprived areas of the country, is to jeopardise the only sources of income and development these areas are likely to find.
Coastal villages and rural hamlets have nothing else to live on except to provide goods and services to the better-off urbanites. This may be unpalatable but it is fact.
Providing so-called affordable housing while failing to attract incoming second home owners is to jeopardise economic development. Cheaper housing will merely end up empty of wage earners as those looking for work end up moving to the cities. This has been the case for centuries, and to penalise the very source of preventing the decay of these communities seems a peculiar way to square the circle.
2017 is likely to be a year of change. Perhaps it could also be the year when housing industry organisations – regulators and professional bodies – rigorously put their own houses in order and then fight government policies likely to damage the private rented sector, reduce economic growth in the poorer communities (and also in the cities where, with Brexit, the country will need to attract investors to live and work} and cause the construction industry to mark time – so leading housing nowhere, possibly along with consumer confidence. That would be a real own goal for a government trying to keep up public confidence while negotiating a deal out of Europe.
However, if you want transparency, sweet reason and no vote catching to rule in the housing sector this year, try wishing upon a star!
- Malcolm Harrison was PR consultant to ARLA from 1988 to 2009/10, having first launched ARLA in 1981. He was also PR consultant to the ARLA Buy to Let Panel of Mortgage Lenders from launch of Buy to Let until 2010, PR consultant to TDS from inception till 2013, and to various commercial companies in the private rented sector including mortgage lenders and insurance companies.
Hang on, am I reading this right? The former advisor to ARLA is stating publically that all it is when creating a tenancy is printing out a tenancy template? What about our associated costs in drawing up that agreement? Yes i agree that some are extortionate and actually, we don’t charge for renewals, but we do charge for our time it takes to create a legally binding agreement, ultimately protecting the tenant as well as the landlord.
We charge £325 all in for two tenants to do the referencing, drawing up the tenancy, organising the inventory, checking them in, changing utilities, protecting the deposit and all this takes about 2 days on average.
£162.50 gross per day before tax and NI so I’ll let the number crunchers work out the net numbers
I assume the author gave his time for free to ARLA as their former adviser?
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Here we go again. Pierce…in a folder on your computer somewhere is a document, probably titled “Tenancy Agreement”. Press print and it will appear out of a hole in that big multi functional square thing that you keep at the back of the office. Please don’t make yourself sound foolish by trying to convince yourself that it costs any time, energy or money to produce. Next you’ll want to charge for a set of property details.
We charge £325 all in for two tenants to do the referencing, drawing up the tenancy, organising the inventory, checking them in, changing utilities, protecting the deposit and all this takes about 2 days on average.
2 DAYS!!!!! Oh please. Maybe if you’ve been anesthetized. I’ve been in letting. Two hours is more like it…if that. Another blinkered letting agent who still can’t quite get to grips with the fact that in a service industry like ours you should be charging the client (the landlord)…..you know, like in sales.
I absolutely love reading letting agents trying to justify the desperate fees they charge tenants. But it is rather sad.
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“…and all this takes about 2 days on average”
maybe I should ahve been a bit more explicit for you.
Some tenancies take 1 day to set up, some take 3 days depending on the tenant and landlord – On average 2 days
“Another blinkered letting agent who still can’t quite get to grips with the fact that in a service industry like ours you should be charging the client (the landlord)…..you know, like in sales”
Glad you clarified that
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Oh I see FromTheHip64, that computer thingy that Dell gave me for free along with the software from a major supplier (that does more than just spit out agreements) that didn’t cost north of £3,000 to install and £150 a month for updates et al and…that multi functional square thing at the back of the office that charges me every time I press a button and every 3 months costs £100 a pop to replace each different colour toner. Next week we are upgrading our software as the current system installed 3 years ago is now going cloud based and we need to pay £1500 for said upgrade.
If I felt confident that just photocopying any old agreement would protect landlord and tenant I would do it but I do not. If I felt that no tenants would ever take a landlord to task and not move out because they had received a photo copied version of the incorrect How to rent guide I would do it. If I felt that I could get away with trying to remember when notices are due, when gas records are due, whether smoke alarms were tested on time, or could just guess how much to deduct from a landlord’s account when we have arranged a repair I would do it….. in fact I would not, I am a professional and I have pride in what I do and want to get it right; if you are mr happy slapdash then carry on as you are but don’t try and drag those that do thjngs right down with you and your sinking ship!
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TBH, I think it is somewhere between the comments of pierce and onthehip….
Having worked in lettings 20 plus years, i would struggle to understand the application stage taking 2 full days. IMHO, in terms of time, maybe 3-6 hours depending on what services were in house or outsourced. Considering, we still physically move tenants in, rather than just hand them keys our process is about 4-5 hours. We outsource the referencing, but do the inventory and physical move in together. Referencing is done online by the tenants, so being honest, we have little input apart from seeing the results and on the odd occasion doing a little more investigation. The right to rent checks are about 2 minutes i.e photocopy, sign and file. Tenancy agreement. depending on the tenant and landlord requirements, normally takes 20-30 minutes to put together along with all the other documents that need to be served. Deposit compliance is relative straightforward now, taking into account a streamlined process and educated member of staff to understand all the problematic issues which arise.
However, Jeremy is right that the additional costs are substantial, which does increase the costs we need to charge landlords and tenants. I do agree that we have, as an industry, been seen to put the costs onto the tenant rather than landlord, and that has been the major problem. I charge the landlord 12.5% and the tenants £100 per applicant each. (no other in tenancy charges). With more legislation on the horizon, the agent model will need to be rethought.
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Sorry, Ding Dong to clarify I wasn’t saying the referencing process takes 2 days, it was the whole process from start to finish. Like Jeremy we want to get it right from the start and not expose the landlord or tenant to any issues that may crop up later on.
For the record I am not trying to justify my fees as fromthehip so eloquently put it (I know you are not questioning that), I know what I have to do as an up to date agent and all we want is a fair price for a decent service. But as you say, times are achanging and we must all change with them.
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Ok. I’ll admit it. And it pains me to say it. Here goes…….. I own a letting agents and I make…… I cant bring myself to say it…… O go on then…… “I own a letting agents and I make a profit” !!! There I have said it out loud. “I make a profit”
Wait a minute, why am i so ashamed to say that out aloud. Every other single business in the entire world works for profit. (Charities, not for profit etc etc excluded) Of course we do. That’s why we are in business. Its not a dirty word so why do people keep mentioning how much things cost us as if that should be the price they pay. I’ve never seen people lobbying outside Asda because they buy a pack of peppers for .16p and sell them for £1.45 !!! Surely Asda should let you have them at cost?
And what do I do with my profit. Well i cloth and feed my family. I put a roof over their heads. And occasionally I spoil them with holidays to compensate for the 72 hours a week I work.
More importantly, we offer a fantastic and professional service to our tenants who rent from us time and time again. Who are more than happy to leave us testimonials on our website and social media.
And just as important, some of that monies employs 12 members of staff. All very happy in their jobs and helping them to look after their families as well.
My final point is this. What is never mentioned is that tenants can quite easily rent without using an agent and therefore not paying fees. Its called Gumtree and alike. So if the tenant wants to meet a complete stranger in the hope that firstly they actually own the house they are advertising, and the tenant wants to hand over money to that stranger, and then on moving in day hope that there are not another 20 people at the house all having left deposits, and even if they are the owner and they do move in, trust that the house is safe to live in and all checks have been done. All this can be done free of charge to the tenant.
Tenants do have a choice but most see the value of using reputable agents. When people say “why are so many people signing petitions to get fees banned if they are value for money” If i put a petition on the Gov website campaigning for FREE ice cream, who wouldn’t sign it ??!!
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FromTheHip…do you currently work in lettings ? As an independent who take all matters of compliance, especially safety, very seriously, I concur that the overall process when doing everything in house takes at least 2 days. To prepare a proper inventory (written and photographic) can take hours in itself. Legionella risk assessment, PAT testing, EICR’s, GSC, Smoke alarms, CO alarms…all of these need documenting, reviewing to ensure no issues identified, if they are that they are rectified prior to check in,checking contractors are registered, have PI insurance etc etc etc All of this on top of deposit protection, tenancy agreement, right to rent, referencing, check in, and other information we need to give tenants. Can someone enlighten me on how to be compliant, protect tenants and landlords both health and safety wise and legally and only charge a LL 50% of first months rent (average l believe) ?? We earn every penny we charge tenants.
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Oh help…..The point is that you are charging the fees to the wrong person. Charge the client…the landlord. No I don’t currently work in lettings….but I have. I currently run a sales office for an independent and charging the client not the purchaser seems to work quite well.
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Hi.
There are two points here. We too have a Sales department and as you rightly say that the seller pays the agent. So why is it that people are not up in arms after a house is sold that the buyer then has to instruct and pay a solicitor to work on their behalf. With your reasoning, the seller only should pay for any solicitors charges seeing as they are the client?
Secondly, if a tenant comes in to our offices they have the opportunity to sit down with our staff and we advise them of in some cases how to rent a property, what the implications and their responsibilities are, offer advice on particular properties and areas etc. All at no charge although my paid staff are there in our building that has to be paid for and so on. There is value right there. That tenant then wants to see half a dozen properties to be able to make an informed decision. Again at a cost to our business and again no charge to that tenant. There is value right there. They may not even go on to rent a property. No problem for us its been a pleasure. So at what point does our service warrant paying for from a tenant? The issue is not charging tenants, its charging the tenants excessively. Name & shame agents who charge over an acceptable rate. Don’t demonise an industry for bad eggs. Ironically mud being flung by politicians. Total vote wining hypocrisy.
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FromTheHip64
Presumably you charge @ 1% for a sale? If so, then you make more money on one sale than we get in an average managed rental over 3 years and you answer your question, once your sale is complete you have no further involvement with the buyer or seller unless they buy or sell through you again, but of course you get yet another fee.
We also do sales so are fully aware of the work involved, the difference is we treat ALL our tenants like clients because that is what they have come to expect. But as you, legal commentators as well as the government have so rightly pointed out, the landlord is the client so guess what will happen when the ban comes in?
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