The head of one of the UK’s largest lettings chains has demanded an explanation as to why a local council has been allowed to set up a commercial estate and letting agency.
Dorian Gonsalves, managing director of Belvoir, says that the Property Bay agency opened late last year by Neath Port Talbot Council is undercutting his own franchisees’ local offices.
Bay, a member of ARLA and Home Sale Network, has two offices, covering Swansea and Mumbles in south Wales.
It was specifically designed to generate council revenue following the Government’s Comprehensive Spending Review.
Gonsalves said: “I find this news disturbing on many levels.
“Our franchise owners are self-employed and their businesses usually require bank funding when they first open. There is always an element of risk when opening any business, but this local authority initiative represents zero risk as public finances are being used to support it.
“This is simply not a level playing field. Belvoir is looking to aggressively expand in Wales, thus creating new employment opportunities, and we are seeking clarity as to whether local authorities are competing against us.
“I also understand that this agency is undercutting our local agency in Swansea in terms of fees charged.
“How can this possibly be right or proper when the Government is clearly telling the public of its plans to support small businesses because of their vital role in revitalising the economy through revenue generated and employment opportunities?
“I find it hard to believe that Eric Pickles, Secretary of State for Communities and Local Government, whose party pledged to help and support the free market and small businesses, has allowed Neath Port Talbot Council to form a council-owned agency.
“Whilst competition in the industry is undoubtedly healthy, there will inevitably be questions surrounding conflict of interest. In addition, where is the transparency if this agency fails to make a profit?”
Gonsalves has written to both Pickles and housing minister Grant Shapps to express his concern.
He said: “Is this initiative going to be rolled out across the country, so that all lettings and estate agents will be competing with a locally funded lettings agency?
“Will undercutting continue or will the local authority charge higher fees than estate agencies?
“I have also asked whether local authorities are willing to offer funding to lettings and estate agents to enable them to grow and develop their businesses, or is this measure a revenue-generating initiative with the potential to damage lettings and estate agents throughout the UK?
“If this decision is allowed to stand it will set a precedent that could see councils opening a number of other tax-funded ventures that will threaten the future livelihood of local small businesses.”
Belvoir, which has over 140 offices nationwide, has offices in Swansea and Wrexham.
Vaughan Schofield, owner of Belvoir Wrexham said: “I am very surprised that Neath Port Talbot Council have been allowed to do something that effectively amounts to the nationalisation of a lettings agency.
“For commercial as well as qualitative reasons, this should be of great concern to existing lettings specialists, and I do not think it is in the best interests of landlords and tenants, or indeed any other taxpayer.”
Ben Davies, who launched Belvoir Swansea last November together with his partner Daisy Hewitt, said: “I think it’s very sad that the council has been allowed to do this. We are young business people from Swansea, and we have spent a lot of time, energy and money opening Belvoir Swansea, with zero help from the Government and local council.”
Hewitt said: “The taxes I pay are now helping to fund a scheme that has the main aim of ‘undercutting’ my own business as well as that of other local agents across South Wales.”
Comments
What we have here is some whining old windbag complaining that they will no longer be able to exploit those on housing benefit. Well good, I hope that this new company drives all these parasites out of business.
The whole process of social housing provision should be performed by the public sector not parasitic slum lords and their letting agents.
Someone commented "What a scandal to use public money to set up a letting agency" ...well its more of a scandal have public money is used to bankroll B2L.
The standard of social housing in UK is a disgrace and the fact that around £13,000,000,000 of taxpayers money is paid to private landlords via Housing benefit each year is just appalling. This money could fund the building of 200,000 homes a year...food for thought
Brilliant,
Put aside the whingeing from a couple of Belvoir Franchisees, that’s missing the point, as is the fact that the story might get some of that HPC lot a bit moist and worked up – they love stuff like this it’s the end of us all as far as they are concerned so they will be getting into a right lather.
The thing is can you imagine the meeting when this got approved at the council;
Massive budget cuts, house market in trouble, council funds under pressure, millions of public sector jobs on the way out and this lot come up with………….
An estate agent – tadaaa!!
So now the council tax payers in this area are funding a business in a notoriously competitive and aggressive sector that is enormously sensitive to the economy in one of the biggest downturns since my granddad was shooting Germans for a living.
So, one question which might decide if this is a good idea – when the head of children’s services in this area asks for more resource to do their job protecting vulnerable children and are told no, will the council having a loss making estate agents in the town seem like a good idea or bad idea?
Oh, one last thing for those too stupid / worked up about hating estate agents to see this for what it is – it wont make money, I promise, it might save some of the (currently) very small number of its clients’ a few bob but that’s different to making money.
Jonnie
Any competition in any area is very welcome. As a council tax payer i support my local council making money from this activity. My experience of using estate and letting agents is that of poor service, high fees and poor attitude. If my local council can provide such services to me as landlord - I welcome it.
The rant from Belvoir seems typical of any player in an industry badly in need of increased competition. I'd welcome the entry of other major players eg Tesco etc in to the industry. It would drive up standards, lower fees and improve choice.
@Taff
I agree with most of what you say.
However, (I am not nit-picking) I think it is important that when we comment on the lettings industry we should not refer to NAEA but to ARLA because it is the dedicated lettings division of NFoPP?
Regards.
I’ve been keeping an eye on www.propertybaywales.co.uk since the news broke about it back in Nov 2010 if I remember correctly, and like most agents initially viewed it with suspicion.
I honestly believe this isn’t just a way of making money for the council, but rather a crude crusade to force estate agents to reduce their commission rates. After all, most of the public believe we spend more time on the golf course than at work, that we all drive top of the range Porsches, wear Rolex watches and spend every half term at St Tropez. If it is just a way of making money, where do they stop? Is it the councils job to open restaurants, cafes, garages etc etc? I suggest not.
There used to be a section showing how much commission owners would save by using them instead of a local agent, but as far as I can see that’s been dropped. I wonder whether they have already increased their commission rates because they couldn’t make a go of it at their previously advertised rate?
They are currently showing a total of 11 properties. For months they were showing just 9. As far as I can see they have not sold a single property – certainly not one of the ones I’ve seen since November have been marked “Under offer” or “Sold Stc”. If it is a money raising exercise for the council, as far as I can see they haven’t made a penny yet from sales and are therefore currently running at a loss. It will be interesting to see how long the council are prepared to subsidise their crusade before admitting it wasn’t such a money spinner as they first thought and pull the plug.
At the end of the day they are just another competitor, so treat them as you would any other competitor (who charges lower commission but doesn’t have a High Street presence, has very limited stock to offer and probably doesn’t advertise in the local paper) and make sure you charge the multiple agency fee if a client wishes to list with them as well.
I hope the NAEA find out via the Freedom Of Information Act if necessary exactly how much this is costing local taxpayers in staff costs, rent, advertising, insurance etc etc etc. If it’s making a loss, why should taxpayers subsidise a council crusade against agents (who after all are only paid on results) when cutbacks are being made everywhere else?
This could well back-fire on them if they can’t make a go of it and they know it. Which is why I hope someone in authority and acting for agents (the NAEA is the obvious one here) keeps a close eye on their trading figures and hold them to account if necessary.
Do I lose sleep over www.propertybaywales.co.uk ? Frankly, No.
Just been on Property Bay Wales site - its a bit dire and they have no letting properties to offer. Is this because they want to let everything they can to those supported by the DSS? Lenders and modern leases preclude DSS, DWP (Department of Works and Pensions) or students.
The service they say they provide for find a tenant only is rap with a silent C to say the least. I provide in the case of tenant find only the AST, inventory, notify utilities, take and place deposits sign up and ensure gas safety or EPC is in place tenant info pack and take back the checked inventory prior to passing to the landlord. That's a proper service.
Its no wonder this business is in a pickle because there are so many unprofessional agents out there and Property Bay Wales looks to me to be yet another one who only do a small part of a very important function.
I have instructions on a house to sell which the landlord let himself and he did not take any checks up on the tenant and guess what? You got it - it was a cannabis factory. If Property Bay Wales carry on they will be in deep do do if they have one like that to contend with. As a government body will they be more liable than the likes of us?
Come on Belvoir show them the way home - it will not be difficult.
Steve Sims:
It is your assumption that I question.
Yes, I do know what the NAEA is about. Membership is one thing and 'Registration' is another.
By the way the 'lead' organisation for Lettings is ARLA
Thankyou for your laymans input but that is all I wish to say on this subject.
Good for Belvoir to have a rant and I agree that this agency should never have been set up as it is not in the local authority remit to be in business in such ways but as rich says they should be emptying bins and filling in potholes.
How many others are there around the country that have set up but have had such a limited impact they have not been noticed?
On a lighter note, Mark May, please learn to spell as it is just letting everyone out there know what they fear most - agents can not spell or understand the English language. Appalling is how to spell this word and appalling you do not know how the spell check works you dim wit.
Steve Sims - firstly, what are you doing on this site. It is for letting agents. Secondly, how do you know Letting Agent Today did not make checks - presumably you've checked with Rosalind Renshaw to find out if your suggestion is correct? If not, then the phrase 'stones and glass houses' springs to mind. Thirdly, as I've already pointed out,no doubt right of reply will not be an issue as I don't believe Ros censors people's views.
Letting Agent Today has been quite right to cover this important issue in the lettings industry, and to give space to the fact that Belvoir is making a stand for the industry.
By the way - there's another error. I understand Property Bay is a separate firm in the area...the council letting agent is Property Bay Wales.
Ray - It's not my job to comment for Property Bay Wales - I'm not involved with them. I suggest you give them a call and get the info first hand like I did.
As a journalist and not a property agent, I assume you guys know what the NAEA is. I assume registered means a member?
My point is the reporting is not balanced and does not present the full facts - rich checked them out online within a few seconds but Letting Agent Today did not bother.
I had an immediate response from the firm's MD.
15 minutes checking would have done the job properly.
I note that most of you are commenting about the council's action but don't seem to care whether the information you are basing your comments on is right.
Steve Sims:
So the initial setting up costs were met from profits that had yet to materialise?
They are 'registered' with the NAEA - just what does that mean?
So this council-owned agency IS a member of NAEA (I googled to check ARLA, and found it is).
Not sure which bits of the story aren't accurate. Obviously it belongs to the PTO, as otherwise it's illegal to sell houses. You'd expect running costs to be met from profits (as with any agent), but presumably it had set-up costs (as with any agent)? How were these met if not from the public coffers? And what happens if this council-owned agency doesn't make a profit (always a possibility)? It also begs the question, could this council-owned agency be making more of a profit for ratepayers if it charged more competitive rates? Anyway, I'm sure Letting Agent Today will give the agency and the council concerned full right of reply.
PS I'm not a Belvoir franchisee, but I do support their stance on this. Councils should not be doing this sort of thing. They should be emptying our rubbish and mending potholes
This story is simply not accurate. I have no connection with Property Bay Wales but have spoken to the managing director specifically about this story as a freelance journalist.
I note Letting Agent Today has not sought a comment in the interests of balanced reporting - the story is just a rewrite of a Belvoir press release with no fact checking.
Property Bay Wales is registered with the Property Ombudsman and NAEA. The MD says all running costs are met from profits and the company started as a letting agent in November 2010, at the same time as Belvoir Swansea.
My understanding is the firm contributes to the councils coffers by paying a dividend rather they tthan taking any funding for staff, premises, advertising or other running costs.
Why didn't someone speak to the council about this?
The Belvoir comments about taxes from Daisy Hewitt are dubious to say the best.
Don't all Councils have an "agency" that manages Landlords properties for a guaranteed rent, usually below market values, then in turn rents them out to their 'housing list', often to Housing Benefit tenants, eventually returning them to the landlord in appauling condition having failed to restore them to the original condition (which was probably appauling in the first place).
I'd love to see whta happens when the council's letting agency tells the prospective tenant that their client doesn't accept Housing Benefit tenants!
By the way, has that bloke from Martyn Gerrard had a hair cut yet?
Belvoir are quite right to raise this. What a scandal to use public money to set up a letting and estate agent. What is to stop local councils using public money to put local shopkeepers out of business by setting up their own corner shops? This is fundamentally not what local councils should be about. What I want to know is why this council owned agent is an ARLA member? Has it also applied to belong to NAEA? What are our membership bodies doing about it? They have been noticeably very quiet so far on this issue, when it was first raised on EAT. As usual, not a word when it actually matters!
It is absolutely outrageous and I can understand the concerns of EA and Letting Agents. For many years personal search companies have been competing against councils in providing conveyancing searches and have had to suffer “dirty tricks” from councils such as, delays in appointments to access the records, restrictions on the number of properties per appointment, high and illegal charges for information which should be free, refusal to post or email information insisting the info must be collected by hand. Not providing a telephone number for contacts in the event of a query and lots of other subtle ways of restricting competition. You may remember the complaints from the days of the Hips? Unfortunately personal search companies did not get much sympathy on this forum. This is only the tip of the iceberg. Stand up now or you will see this type of unfair competition expanded. The councils have deep pockets and, like search companies their aim will be to see off the competition
Market forces as EA's & Lettings agents were all too quick to say when DEA's complained about low fee rates.
Well maybe your bubble is now being burst by local authorities looking to add extra income - it must pay quite well for them to enter the market.