Whether you are new to renting out your property or are vastly experienced as a landlord, one thing will always remain high on your list of priorities when getting your property listed. The lettings agent fees.
Of course, many landlords go it alone and avoid such fees, targeting a smaller market of potential tenants and relying on their knowledge of the market to find people looking to rent. This isn’t always the best method though. Whilst the costs may be less, the management of the property is much harder, and the resources available, are much more limited.
As a result, landlords opting for the professional support and guidance of a letting agent will likely want to know the associated fees to get their property listed and shown to the perfect tenants.
In this edition of our blog, we break down how much a lettings agent will charge and what they are charging for. It is worth pointing out, that depending on the letting agent you choose, and the services you opt for, you could be looking at a charge of anything from just under 10% of the rent to well above 20%. Let’s look at how it works so you know the best options for your properties.
What are letting agent fees for landlords?
Letting agent fees can be quite wide-ranging, but the services that come from paying them do make a landlord’s life much easier. By paying a letting agent to look after certain aspects of the tenancy, the landlord can allow much of the work to be taken on by the specialist agent rather than having to take it on themselves.
Paid as either a flat fee or as a percentage of the monthly rent, the fees can cover the finding of new tenants, reference checking, rent payments and much more. When looking for a letting agent to look after a property, a landlord should investigate the services offered to see that they match their specific needs.
What are the fees charged by letting agents?
The fees charged by letting agents to landlords vary depending on the services required by the landlord. In some cases, a landlord may opt for a fully managed service, where the agent looks after every aspect of the letting. In others, a landlord may look for a service where rent is collected on their behalf by the letting agent, and all other aspects are looked after by the landlord, or someone else they may appoint.
Typically, there are three different types of service provided to landlords by the letting agents. Landlords can opt for all, or just one of these services although it is more common to see properties fully managed for ease:
- Fully managed services include every aspect of looking after the property and its maintenance, as well as all dealings with the tenant. This could include gas safety checks, electrical maintenance, and general repairs, as well as collecting the rent and liaising with the tenants. In fully managed services, tenants approach the letting agent regarding anything to do with the tenancy. This could include ending it, extending it, or having questions about it. The landlord can simply let the agent take control, only needing to sign off on expenses where necessary.
- A rent collection service is just that. A service where the letting agent handles the collection of the rent, charging the landlord a fee for doing so. The agent would also organise the collection of rent arrears when necessary. A percentage is then deducted by the letting agent from the rent for this. Like other charges, it varies but is typically 1-2% extra on top of the property management fees.
- A let-only service is where the property is advertised, and a suitable tenant is found by the letting agent. The letting agent will then carry out reference checks, complete contracts and organise for the tenants to take on the tenancy. The landlord then pays a fee to the agent for completing the process for them. This amount can vary but is normally calculated based on 50%-100% of the first month’s rent.
How much are letting agent fees for landlords?
The total letting agent fees for a landlord will vary on the service provided, but typically, fees can range from less than 10% of the total rent to more than 20%. The property location, its size and the rent cost will all be factored in. Different services though will accrue different charges, and this should be factored in by any landlord considering using a letting agent. Some fees can be as little as £10-£20, but others can soon reach the hundreds. A landlord would be best assessing what their property needs and how they would like their property managed. An end-of-tenancy clean for example, is offered by the letting agent, but the landlord may prefer to source their own cleaner. Paying for this service from the agent would then be pointless.
How much do letting agents charge to manage a property?
Managing the property takes a lot of the pressure off the landlord, and with a potential portfolio of properties as well as a regular job to hold down, opting for the assistance of a letting agent can be a good idea. Management fees can range from around 10-15% of the monthly rent, but it can be more. The management fees can include finding the tenants, collecting the rent, and dealing with any issues that may arise during the tenancy. Costs and other fees you may encounter are shown below:
- Finding tenant fees: These can vary significantly so it is always worth a landlord researching this in advance. You can expect a range from 50%-100% of the first month’s rent for these charges.
- Reference checks: Each tenant will need to be reference checked before they can be allowed to rent the property. The letting agent will do this based on a set fee per tenant. Prices can range from less than £30 per person to more than £100 in some cases.
- Inventory fees: The property is likely to be furnished and decorated to a certain standard and it is the tenant’s responsibility to look after the property as best as possible during their time there. The inventory will show details of the property, its content and its condition. A landlord should expect to pay a set fee that can range from £50-£200 for this service.
- Grounds maintenance: Some properties are lucky enough to have outdoor space, and it may be that the maintenance of these areas is looked after by a contractor sourced by the letting agent. The fees for this can vary depending on what is being looked after. They can be as low as £20 but can easily rise to more than £100 per month.
- Renewal fees: When a contract comes to its end, there is always the option for renewal should the landlord and tenant be looking to do so. A letting agent can handle this by drafting a new contract and organising any paperwork. A landlord should expect a fee of 10-15% of the monthly rent charge for this.
These are the most common fees, and it would not be unusual to see others accrue. The granting of an EPC, the installation of new smoke alarms, mail forwarding, and more can all be factored in and charged for.
The fees charged by letting agents can be opted in or out of. If a landlord doesn’t require a particular service being offered, they can simply pick those that are needed allowing for a bespoke service that caters to their specific needs.
With VAT to be added on top though, it is very easy for landlords to see costs mount up. That is why many opt for the fully managed service, as overall, the total expense tends to be much more affordable.
Can a landlord avoid the fees for letting agents?
It is possible. A landlord can do much, if not all, of the property management, cash handling and legal paperwork themselves. There is no legal requirement for a landlord to appoint an agent to organise and manage the letting of a property.
That being said, if the landlord is not sure about specific property law, doesn’t have much time on their hands, or is a little unsure of how to market a property, it would be best advised to find a letting agent. The property can then be advertised and looked after by experienced professionals giving a landlord the chance to focus on other important aspects of their life.
Ban on letting agent fees for tenants
It would be worth mentioning the Tenant Fees Act 2019 that went into force in June 2019. This act was introduced to assist tenants and make the rental market more accessible for those unable to buy property. For landlords, this could be seen as a good thing as the market now has a wider customer base. The changes mean that a letting agent can now only charge tenants for:
- A refundable holding deposit capped at one week’s rent.
- A refundable tenancy deposit capped at five weeks of rent where rent is less than £50,000 annually or six weeks of rent where rent is more than £50,000 annually.
- Changes to tenancy agreements capped at £50 or an amount deemed reasonable if costs to accommodate changes cost more than £50.
- Payments for early termination of the tenancy when requested by the tenant.
Ultimately, the choice is down to the landlord whether they opt to go it alone or choose the help of a professional and experienced lettings agent. Both options have their benefits but for maximum results and minimum stress, a letting agent would be the most productive result.
If you are a landlord and looking for the best way to get your property to market. Speak to our team at Cairds. As members of ARLA, we are members of the leading regulatory of the lettings industry. As a result, we are bound to specific rules that protect the landlord and ensure we meet specific standards. Working as independent Epsom letting agents we can tailor our services to your needs, simply speak to our experienced team so we can deliver you the perfect lettings service for your properties. Letting out your house in Epsom, Ashtead and beyond is made easy with Cairds. Contact us today to find out more.