Lettings industry representatives have met with Shelter to open discussions about agents’ fees and charges – which are currently in the charity’s line of fire.
More talks with Shelter are now on the cards, with NALS being given the mandate to act as industry mouthpiece.
Last week’s meeting of the NALS industry forum invited along a member of Shelter.
The invitation was sparked by a spate of recent campaigns from Shelter, including The Extended Rental Contract, The Fight Against Rogue Landlords and most recently, Letting Away with It – the campaign against alleged unfair letting agent charges.
The outcome of the meeting was an agreement that NALS would act as the conduit for sharing information about working practices in the industry with Shelter.
Isobel Thomson, chief executive of NALS, said: “We welcome the opportunity to speak to Shelter about its current campaigns. Shelter gives a voice to tenant and consumer concerns, and as an industry we have a duty to listen and respond.
“What these recent campaigns have done is to highlight the need for more dialogue between ‘us’ and ‘them’. It’s clear that at present there is a basic lack of understanding about how – and why – letting agents charge fees, with an assumption that these charges are unfair.
“Anyone working within the industry, on the other hand, will know that time and manpower goes into tasks such as drawing up inventories, checking references and administration. These practices, when done properly, are valuable for all parties and the commercial reality is that they simply cannot be done for free.
“The key to better understanding is transparency. We need to work with Shelter to fill the information vacuum and to explain how firms work. We’re not hiding anything!
“As an industry, we need to be clear about which services are charged for, why the services are important, and most importantly, the benefits they have for tenants and landlords.
“Timing is also important: tenants need to be told upfront what fees will be charged for and how much it will cost, to avoid any nasty surprises along the way.”
The NALS industry forum was attending by representatives from the following letting agents: Belvoir, Leaders, Northwood, Spicerhaart, Winkworth and Your Move.
This morning, ARLA made it plain that it was also communicating with Shelter.
A statement reacting to this story said: “We strive to work with a wide variety of organisations across the sector to help foster informed debate about issues that are important to both consumers and members, and ARLA has engaged with Shelter on several occasions over recent months with this in mind.
“Indeed, we were pre-briefed on the recent report by Shelter and in reflection of this ongoing relationship, ARLA MD Ian Potter recently shared a speaking opportunity with Kay Boycott from Shelter. Further, Shelter CEO Campbell Robb, will be speaking at the ARLA annual conference on 26th March 2013 in order that members can hear both sides of the debate.”
Comments
The point some of youare missing is.......
The Landlord paying 5% is still getting the same service as the one paying 10%. The difference is the 5% Landlord is getting his tenant to pay the shortfall through tenants fees. To me this is what all the debate is about and quite rightly taken full on by Shelter. Look at the number of new online sites offering "Free" services to Landlords...who is paying their overheads....the Tenants of course!!! Agents are appointed to act on behalf of their Landlord not the tenant....why should the tenant pay their fees?
I press one button to create all my documents £400 Agent labour charge to tenant..... I think not. £100 "check in" fee to go over an inventory....I think not. The tenant does not need an inventory under TDS..... it is up to Landlord to prove the tenant should not get deposit back.
Tenants fees are about to be decimated........get real and get your business model changed sooner than later to take these changes into account.
I run my business along the lines Petetong has described but I agree with James.
Have I just contradicted myself? Not at all.
My fees are relatively high but I believe I provide good value for money. Happily many hundreds of landlords seem to agree, which is why I've got a successful business.
However, if everybody else tried to operate the same model they would quickly come unstuck because many landlords either can't or won't pay fees at the level I charge.
To draw an analogy Jaguar have a successful business selling premium cars at premium prices. That doesn't mean Ford should raise the specification of their cars and try to sell them for Jaguar money.
Fair comments James...
I have worked for a similar number of years in the industry in different towns and cities to include North London.
My experience is my experience and that is all I can quote. As you quire rightly state, the ability to communicate why the landlord should use YOU rather than someone else is the main issue.
In the end, I can only say that most of my landlords pay slightly more than average but know that they receive a much better service.
I'm sorry Petetong but your post is just misguided as the first.
"Any landlord who chooses an letting agent on commission alone is not a landlord generally, you want in your portfolio."
I would argue that all Landlords look at commission fees as a deciding factor. You are right that this should not be the sole deciding factor but as we have experienced in our area many new one man band agents simply copy all the selling points the established agent is trying to sell itself on. Unless you actually get the call from a Landlord in the first place, how do you propose we educate the Landlord to the merits of using a good agent?
Are you presuming that the other agents will suggest that they are cheap because they are rubbish? Of course not. Every agent sells itself as being able to offer the same service standards. Whether they can or not will be proven over time. While most of our Landlords return, they do not bring the commisson fees we have lost over the last year or two.
Your experience is clearly of a very different market. Our Landlords are cash strapped and struggling. There is little new investment in the area and getting maintenance carried out feels like a battle every time. Yet we maintain a well regarded business. Our area average rentals are £650pcm so you can imagine that a boiler replacement puts the landlord out of two months rent. In london this may only represent a single month or less. Your presumption that we are not providing a valued service is misplaced. More accurately we lack the ability to demonstrate why an agent down the road offering a fee at half our levels but apparently offering the same service standards should not be used.
While it sounds great fun to point out how the market and agents should operate, the fact is it doesnt. You can either adopt the moral highground and go out of business or you need to adapt as best as possible to changing market conditions.
I have been in the industry for over 18 years. I have passed all the industry qualifications and have worked for independents, international property firms and run my own businesses. I have worked in the super prime markets and in very low value markets. In each case I cater our fees to the market in which I operate. I don't need Shelter telling me how to carry out my business.
That said, if the industry is forced into regulation and all the cowboy agents are removed and a level playing field is created allowing agents to charge appropriate fees for a good standard of service, then perhaps there is an opportunity to look at this again.
I have rambled in this post and yet only touched the surface of issues I have with this.
I agree with IO on this one...
Any landlord who chooses an letting agent on commission alone is not a landlord generally, you want in your portfolio. You spend more time trying to explain why repairs are needed and why a rent payment is not in their account at 9am on the due rent date.
If your landlords, as you claim, are happy with your service but then go to someone charging 5%, then I m going to have a guess that you are either not providing a valued service or your landlord is that financial strapped that they may not survive an interest rate hike.
From my experience, the majority of landlords understand that this is a long term venture and that paying for a efficient and professional service costs alot more than 5%!!!
Well put James!
The level of charges needs to be the defining factor here, not the charges themselves.
Most landlords are accidental or on a tight budget. Its simple mathematics to see that if you load the landlord, he in turn will simply load the rent so the tenant ends up paying more in the long run than he would if he paid the fee in the first place.
Agents trying to do this piecemeal will simply fall to the wolves as landlords leave for the cheaper deal up the road.
I'm sure IO will have some utopian scenario ready where that won't happen but, in reality, it will. Shelter will then call harder for rent controls and, if that happens, investment will drop out of the PRS very quickly if they see their returns shrinking; history has a nasty habit of repeating itself like that.
You either don't work in lettings or work in an area where Landlords are happy to pay agent's fees Industry Observer.
Your proposal for any agent based in low value areas represents commercial suicide. We have already seen management fees eroded from 15% down to an average 10% for fully managed.
It is hard enough for us to compete against unscrupulous agents who advise Landlords not to bother with EPCs and electrical certificates which we insist on without then adding more costs. We have seen droves of Landlords leave our services for cheap alternatives offering fees as low as 5% fully managed. This is not because they are unhappy with our services but because they are struggling financially.
To propose offloading more administration charges onto the Landlord is effectively proposing we lock our doors and close down.
I shall be very interested to see how the system works in Scotland. How will an agent or Landlord ensure that any potential applicant is serious about an application. Presumably they will be able to apply for as many properties as they want and simply change their mind at any point prior to the commencement of any tenancy. I can just imagine our success rate when asking Landlords to pay our costs for administration on applicants who simply disappear.
At a guess I imagine a Landlord or agent will simply increase a rental to incorporate the administration fee amount or have the first month's rental set higher than the following.
We charge a small fee to administer an application. We refund a portion of this fee if the tenants change their mind depending on the amount of work that has been carried out. This seemed to meet the requirements of the OFT. This has worked fine for over 16 years and I fail to see what is creating such urgency for change.
If anything needs to happen it should be related to the level of charge rather than the charge itself.
A good move but one I fear that will not get a positive result unless and until a similar position is adopted in E&W as always applied in Scotland, and has now been reinforced.
Shelter don't need eductaion and to be informed how agents work. They are already well aware of that.
The problem is they don't like how the agents work in terms of tenant fees and charges. I have been saying it for years and pigeons are now on their way home to roost.
All agents who are over reliant on fees from tenants as a major income stream need to be addressing that over reliance now and correcting the balance I would suggest over the next couple of years.
Excessive charges need to be reduced, and where fees are charged to both parties, to gradually start loading more onto the landlord.