Agents have a duty of care not a conflict of interest

What are your thoughts on charging admin fees to contractors in Lettings?

As both an agency owner and landlord, I feel I have an unbiased view on this. It’s never sat right with me and now that I’m in control of my fees, I don’t charge them. My view is that a landlord pays us a management fee, which we agree from day one, to manage their tenancy and look after their best interests. Yes, it can be argued that due to the levels of business we give contractors it’s fair to charge them a fee due to the amount they’re going to earn, but we all know those contractors aren’t taking a hit - they’re increasing their prices to cover the agent’s fees - maybe as a landlord you didn't know that?

So how is that looking after our landlords’ best interest? From a financial perspective an agent benefits from arranging works and spending landlord’s money. Surely, siphoning money out of your rental income is a conflict of interest?  

I would say to the agent if your costs aren’t being covered, then charge a higher management fee and justify why you’re worth it. But don’t double dip! There are some agents who will say that business is business, but in my experience that’s just an excuse to do the morally wrong thing and not feel bad about it.

Now there are many landlords who would be quite happy to pay for the extra referral fee the problem is most agents aren't transparent about these extra costs which do mount up over time for a property that is managed by them.

You may be one of the landlords reading this who has a property managed by an agent and you may have no issue with commission on contractor’s invoices. That is if the agent is upfront about it and had considered other charges - for instance very low monthly management charge. But if their workload increases due to issues at the property, you can justify paying a little more that month.

As a landlord myself what I expect by my agent is to be negotiating the best return from my investment and using the level of business they give contractors to get me the best rate. Obviously, this doesn't mean increasing their own profit margins against my rental statement every month. A good agent would always use the same contractors on their books who can provide a professional service, get the job done satisfactorily and offer competitive rates, for the privilege of giving them lots of business. 

I'm also looking for an agent who can keep the tenant in the property for a long period of time. Renew the tenancy agreement on a yearly basis and on occasion negotiate an increase in rent. Carry out at least two property inspections per year to make sure tenancy is properly maintained, kept clean and tidy with no breaches of the tenancy agreement. I'm looking for an agent who has a duty of care to me and can demonstrate adding value in the service they provide, which means giving more than taking.

I'm looking for an agent who's prepared to do the research when delving into unknown territory. I have a very good example of this earlier in the year. Where my client wanted to replace a rooted wooden outside staircase leading to the garden from a flat on the first floor. My client wanted to go for a galvanised steel platform with handrails, he wanted the best and although I knew it wasn't going to be cheap, I had no idea how much it would cost.

My duty of care was to provide at least 3 quotes, the first came in at £10,155 plus vat. I said to my client you are better off replacing the old wooden staircase for a new one. Anyhow, my client still wanted a steel galvanised staircase, so I thought well let’s get another quote and see where it takes us. The second quote wasn't much better than the first coming in at £10,875 plus vat. I said to my client do you still want a galvanised staircase? He said yes, but not at those prices. After those two quotes I left it for a while thinking I wasn't going to get much better until I did some shopping around. And "Lo and behold" the third quote came in at £5,200 plus vat. Big difference, right? It just goes to show you how much disparity there is out there, shopping around can pay off!! Apparently steel prices have gone up this year due to demand and supply issues all three contractors said the same thing and yet amongst the three quotes one of them was 50% cheaper!!

Make sure that as a landlord when using an agent, you have done your research and know what you are getting into before the proverbial stuff hits the fan. Make sure you have consolidated on three basic areas of a full management agreement that is the letting fee, the management fee which includes rent collection and any additional fees which we have already highlighted in this article. 

If you are a landlord who would like to find out more about how we can help you with our management service, you can complete your details on the contact us page and we will be in touch.