The director of a growing letting agency has welcomed calls for reform to help weed out property agents that fail to safeguard landlords’ and tenants’ money - but said that low-fee agents can be just as good as more expensive ones.
Ajay Jagota, managing director at Kis Lettings in the North-East, is stressing that the amount agents charge cannot be used as an indicator of their professionalism and service.
Jagota was responding to comments by fellow letting agent Sarah Rushbrook who said that landlords should not simply opt to go with the agent charging the lowest fee.
He said: “Yes, there may be some seemingly bargain agents that need to be avoided, but landlords need to do more research than merely looking at cost to determine whether agents have the expertise and knowledge to provide a quality, secure service.
“In order to remain competitive, there are companies that have developed ways of working smarter so that we can provide the same high-quality service but at a fraction of the cost that other agents might charge.”
He said KIS Lettings, which charges a 5% fee, has invested in an online portal which its landlords can use to access up-to-date details on all of their properties, including marketing information, legal documents and rent payment history.
Jagota said the system means that staff can work smarter. By keeping landlords updated daily online, they receive fewer queries which means administration work is much more efficient.
He also claimed that the company is also innovative in its approach to providing security for landlords through a guarantor scheme which is backed by Prestige Insurance. It means that tenants do not pay a deposit: instead they have a guarantor, normally a family member or close friend, who will act as an insurance and accept liability on behalf of the tenant.
Jagota added: “The bottom line when choosing a letting agent is to do some background research to ensure you choose a reputable company.
“If possible, landlords should meet agents prior to signing any contracts and many can provide recommendations from their existing clients. Most importantly, they need to ensure that there’s insurance in place which covers them should their tenant default.”
KIS Lettings
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Comments
Industry Observer -
Whilst I struggle with your syntax I do appreciate you addressing me as Sir!
@Hoirses
Not an insult a fact I thought.
I will exchange no further with someone attempting to portray themselves as a clever dick. I assume nothing but probably do know at least as much if not more than you, but that is your problem not mine.
Goodday to you Sir
You assume you know more than I do and we all know why you should never assume anything...(pun very much intended).
PS. if you're going to take me to task about manners you really shouldn't start off with an insult.
@Horses for Courses
Don't be such an ass (pun very much intended!)
For the past 18+ years I have been advising agents with 20 properties who work from home to agents with several offices, dozens of staff and a thousand properties. Before that I was rented housing manager for the now biggest Building Society.
Unlike you maybe I know a little of what I am talking about. Unlike you though I certainly have some manners.
However I didn't realise that this 5% outfit charge what everyone else refers to as very high up front fees and that of course does not surprise me.
Steve from Leicester and me don't always agree but here we are both correct.
To set the record straight… KIS is an expanding lettings agency committed to innovation and offering the best possible service. We’ve been operating the 5% management fee for six years and it’s proven both popular and effective. Our business model is sustainable! Many of our landlords have been with us from the beginning and remain very happy with the professional service we provide. In a market that is not regulated, we’re doing all we can to set our own high operational standards. We’re pleased to receive the backing of an insurance company which is directly regulated by the FSA. Our staff are all trained in, or are training towards, industry qualifications and we are always striving to improve and better our existing quality service.
@horses for courses
I simply wondered aloud why people choose not to use their own names on these forums; I don't believe I questioned the integrity of your post, nor did I suggest that using my own name made mine more pertinent. You're certainly not alone in wishing to post anonymously. Perhaps I hit a nerve?
I don't believe I speculated on the agents income at all. He openly declares that he charges 5% commission. His website provides the information about his other charges, £250 from the landlord for a tenant find fee and also £250 from the tenant for an admin fee. It doesn't say whether that is per tenant so in fact, rather than speculate, I took it as a singular payment.
In what way is that speculation?
I can't speak for others users here but I have been running letting agencies for close on 25 years, 20 of those years either in senior management or on a management consultancy basis. I think I have a good idea of the running costs of a letting agency, from a manual system through to a (mostly) automated system and the same is true of all of them - the commission figure is meaningless, its what your total income is that is important.
If this agent really could manage his portfolio on JUST 5% commission income then he wouldn't need to take fees too, would he?
We have agents in our area offering 5% commission but they also charge setting up fees and higher than average admin fees. In addition we have found, from conversations with landlords who use them, that they do not do inspections and expect landlords to chase up their own tenants for rent arrears - 'you gets what you pays for'
I can't even see the word warranty in the article, have others seen something i have missed?
Ray Comer -
Does not using my real name lesson the content of my blog? How would publishing my identity add any provenance to what I wrote? I've never met or heard of you so how is your real name supposed to influence how I interpret anything you say? Surely but not publishing my real name means you are not able to garner a bias based on my form?
I have no interest in self promotion and the ethos of this forum, much like every other is not about who I am but rather what I have to say.
My piece intended to show that we need all the figures before passing comment. You speculate about this agents income but make no mention of outgoings and yet you still form a derogatory opinion.
5% is hard to make work, the £500 he collects in tenant admin and tenant find fees helps of course.
Horses for courses (why are people so keen to protect their real identity/scared to use their real names on these forums?) suggests additional income streams, which is fine as long as they are all agreed with their clients if its off the back of their rental business.
Saying that, their highest rent is still only £300 per week according to their website. £15600 pa only returns £780, plus their £500 fee so £1280 for a years management. Thats viable at 5% if you reduce your service level down sufficiently and get the landlord to do as much as possible himself on line.
But on their £50pw properties, which they seem to have lot of, thats only £130. Again, its their high fees that saves the day.
There is nothing new in advertising a headline grabbing commission rate and then quietly stuffing them with big fees.
Apples & Pears.
The percentage argument is a complete red herring and headline grabber. Neil is quite correct with his observation that it depends on the average pounds sterling value pcm & the relevant business model. I think that I could make money on 4.9% if I operated out of my sisters spare bedroom.
Industry Observer has no idea of the costs of any agent to make such a brash statement that questions his colleagues P+L and integrity. A personal opinion rather than an informed one so we can excuse his ignorance and indeed arrogance.
Our Industry business model isn't set in stone so individuals can innovate and generate revenue from other streams, make better use of new technology and streamline admin.
Keep up IO times are changing!!
Their website is illegal. Just to be picky.
Perhaps they saved on the legal advice.....
This Ajay chap has popped up before - I'll give him credit for being a very good self-publicist.
I share IO's view - I couldnt provide a professional management service for anything like 5% (unless I charged a massive set-up fee of course).
Some things can be streamlined and automated, but some aspects of property management - management visits, fielding calls from tenants and deciding how best to handle whatever issue has cropped up and so on - require real people.
Once you grow beyond a one man band and have to start employing people your costs soar - salaries, desks for people to sit at, office space to put the desks in, phones and computers to enable them to do their job, the 13.8% employers NI contribution (literally a tax on jobs) etc etc all cost money and 5% ain't going to cover it unless, as IO rightly says, the underlying rental values are huge or the portfolio is sufficiently large to generate massive economies of scale.
No agent can possibly survive on 5% and do a good job unless they have incredibly efficient systems AND a massive volume of business.
Most of the warranty type deposit avoidance policies are almost as useless as a local authority provided deposit. as someone else commented too many strings and the usual attitude when it comes to payout time.
Why so many people put to much effort into trying to get round systems instead of simply complying with them has always defeated me.
5% may be viable for online agents who dont pay commissions to staff or for insurances / regulation as they are the principal. Otherwise, no chance unless top end market stuff.
I would like to know the average rent of KIS Lettings. 5% maybe achievable with rents £700+/mth. My local area is £400/mth...I would be out of business in months.
Stonehenge,
The FSA have no specific definition of the difference between a warranty and an insurance policy.
However, a quick read of the guidance points to the fact, or at leaet suggests, that a Rental Guarantee and/or Legal Expenses "warranty" amounts to an insurance contract in all but name.
With the FSA hot on the heels of tenant referencing providers I do not wish to be the agent involved in the test case to determine whether I am providing a warranty or an insurance policy (which simply has "Warranty" written on the top) without being regulated.
The first might be ok if it is deemed that it is a warranty. The second means I commit an offence under the FSM Act.
Our referencing provider gives a great option which removes all of this without us being authorised other than as an IAR.
LetsXL referencing agency have being offering a warranty up to one and a half times one months rent which they pay out of their own funds if there is a claim.
This means they don't have to be FSA registered as it is not an insurance based product. It also cuts out all the time wasting to register at the outset, and recover the deposit at the end of the tenancy.
I don't know how any Letting Agent can make their Business pay charging only 5% and provide a proper professional services to their Clients. With the overheads that go with running a Letting Agency properly, perhaps someone could enlighten us?
No deposit? Insurance based? Can't imagine experienced landlords liking that.... insurance companies don't pay out at the best of times... would love to know what happens when it all goes wrong!