Paul Rowland used to be a letting agent, working for a large London agency chain, so he knows all about the lies and the little tricks they use to squeeze more money out of naïve and newbie landlords. Since he’s now set up his own property services company, Acara Management , he’s ready to share his insider secrets to save you money.
All letting agents’ fees are negotiable…
….especially if you tell the letting agent you’re considering using a rival agency instead. Paul reckons most agents are prepared to reduce their commission by one or two percentage points. Perhaps leaving a rivals’ brochure on the coffee table might help?!
They might ‘forget’ to mention those additional fees
Agents usually charge fees on top of their commission to cover the cost of things like preparing a tenancy agreement and protecting the tenants’ deposit. Charging 10% of the annual rent isn’t enough, apparently. However, Paul says most of these fees can be waived, as long as you make it clear from the get-go that you’re not paying them. “The agent considers this money for old rope – bonus money. Bargaining chips if you will,” he says.
Renewal fees which go on and on…and on can easily be avoided
When a letting agent finds you a tenant, they’ll expect you to pay them commission for every year that tenant remains in the property, but you might not realise this until you get a nasty bill when the tenant renews their contract. And the reason you might not be aware of these fees is that agents don’t like to mention them until they’ve already got you over a barrel. Oh sure, they’re in the Ts and Cs, but who reads the small print? However, Paul insists that renewal fees are negotiable and some agents will waive them completely to get your business, as long as you do this before you sign the contract.
Skip the Ts & Cs
Occasionally you’ll get a super-keen agent who’ll find you a tenant even before you’ve signed the contract – which puts you in an even stronger bargaining position. “At that stage, the agent doesn’t care if they’re getting 8%, 7% or 6%, they’ve already done the work and don’t want to end up with nothing,” says Paul.
NEVER agree to a sole agency deal
Ask an agent for a discount on their commission and they’ll usually try to lock you into a sole agency deal in return – some will go as far as to say that they can only offer a discount to sole agency landlords – but it’s not in your best interest to have only one agent marketing your property – think about it, the more agents there are trying to find you tenants, the more likely it is you’ll get one faster, so just say no. If you dig your heels in, most will back down, Paul says, and if you find one who doesn’t, find another who will.
Landlords need a break, agents don’t
“The only reason agents tell you not to allow the contract to be broken at any point is because the longer the landlord and tenant are tied together, the more the agent will earn,” says Paul. “Trust me, you must have a break clause because if you don’t and the tenant turns out to be a nightmare, you’ll find it much harder to get rid of them.”
Long fixed-term agreements are good for only one person – the agent
Similarly, there’s no reason to agree to an initial fixed term of more than 12 months and the only reason the agent will suggest this is to earn more commission for themselves. One well-known high street agent always tries to impose two-year contacts on landlords and tenants and why wouldn’t they – that’s two years’ commission for them instead of one. Easy money, isn’t it?
You have a right to meet your tenants
Agents often don’t want to give the landlord any face time with their prospective tenant because they’re worried about what both parties might find out during this little head to head. For example, the tenant might reveal that they didn’t insist on the agent managing the property, contrary to what the agent told you, or they didn’t request a two-year agreement.
Remember, the agent isn’t working for you, they’re working for their commission so they don’t necessarily care what the tenant is like so, if possible, you should insist on meeting them before you sign the contract to make sure they’re suitable.
Here are some porkies we’ve been told by letting agents over the years:
- “Landlords aren’t allowed to hold on to the deposit, it must be the agent.” Not true, landlords can hold the deposit, as long as they’re registered with a deposit protection scheme
- “Landlords can’t manage properties themselves.” Of course they can, but anyone they appoint to manage a property on their behalf must be a member of a redress scheme.
- “Landlords must pay for an electrical safety check.” This only applies if your property is an HMO, but agents will be happy to arrange this for you – for a nice fee!
- “Landlords must have a professional analysis of the risk of Legionnaire’s Disease”… which, of course, will earn the agent another nice fee. Also not true, you can carry out your own assessment and a professional survey is only really necessary if your property is higher risk, for example if you have open water tanks or it’s been empty for a long time. Read more about landlords’ legal obligations here and assessments for Legionnaire’s Disease here.
And here’s something most agents don’t point out to you. If they manage your property, not only will they charge you a management fee, but they’ll also add up to 20% (sometimes even more) to the bill for any work they arrange on your behalf. Bear this in mind when negotiating the contract.
Hiring a good letting agent can take away a lot of the stress and hassle of finding tenants, but use the info above to make sure you hire them on the right terms.
And if you want to save the commission and find tenants yourself, here’s how.