A property management company has accused lettings agents of arranging secret commissions' from contractors brought in to do ad hoc maintenance and repair work.
The Happy Tenant Company says letting agents routinely add a commission on top of a contractor's fee, with the landlord being stung for the additional amount.
Jonathan Monjack, a lawyer and chief executive of The Happy Tenant Company, has revealed the practice to the Daily Telegraph, saying: We have cases where a contractor provided a service for £100 and the agent billed the landlord for £120 and took a 60 per cent cut from the contractor. Essentially the agent received £80 for arranging a job that cost £100. This type of practice drives up contractors' prices and landlords are forced to foot the bill.
Monjack describes this as questionably fraudulent and says agents should abide by their duty of acting in the best interests of their landlord clients.
The Property Ombudsman's Lettings Code of Practice says there must be transparency in agents' fees levied on landlords. The Trading Standards Institute states that it is aware of the allegations but has not been presented with firm evidence of wrong-doing; it says no convictions or prosecutions have been made on this subject using existing trading standards laws.
LAT has long campaigned for lettings agents to be as transparent as possible, not only to give landlords and tenants a fair deal but to clean-up the tarnished image of the entire industry.
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Comments
I have just been subjected to this practice by a letting agent who have taken over a long standing customer of mine they want 12 1/2 % of my invoice value as far as I am concerned they can get stuffed but would like to highlight this practice by this company and try to stop it.
Is there a body who will help fight this highly questionable business practice
@ Guest (Norfolkandgood)
The client is NOT paying extra for the work! They are paying the contractors open market price.
Please could give me a good reason why letting agents shouldn't do this We do not add this onto our landlords its a finders fee the contractor must pay to earn well over 100k PA on our properties. Am I missing something
MCS makes a valid point, if I understand it correctly the scenario proposed is as follows: I engage a contractor who charges his normal going rates to us. I give him regular work week in week out, and always make sure he gets paid on time. He has no bad debts with us, regular work, good communication channels; in other words a very favourable position for him to be in. Not to mention that he is not having the (expensive) overhead of advertising for our work. I then negotiate that in return for all of the above, he provides me with a trade discount (call it what you will) of, say, 10%. I actually think that's all very fair and square - but should the landlord client be made aware of that arrangement
MC S yes but the client is paying 10% extra for the work, so is being ripped off.
Not normal business, normal business is your fee level not something hidden on someone elses bill. The contractor marks up parts but risks not having the best quote, that's up to him.
e.g.
Instructed contractors regular open market price is say 10 (which is what the client pays)
Instructing managing agent deducts the 10 from clients account (previously agreed) Deducts 10% from the contractors invoice and pays the contractor 9
The 1 is not a commission, it is an introduction charge agreed between them - nothing to do with the client. Completely acceptable
The same practice is occuring with EPCs where some agents have an agreement for DEAs to charge clients direct, but then there is a monthly marketing fee invoiced to the DEA of c15 or more for each EPC referred by the agent. The clients are I am sure unaware of the practice.
I'm sure contractors add a mark up on the parts they purchase, but they do not have to disclose this, unlike the agent. Of course some agents do add a mark up, it's called business and it's the same in every other business. As long as the Landlord is aware then all is fine.
Letting Agents do not 'routinely' add a commission. I have worked for 6 different Agents in the last 11 years and not one charges commission on top of the contractors bill. We have in fact refused the offer. I do know of Agents that charge a commission but let landlords know of this. So please do not tar us all with the same brush as the unregulated cowboys.
A cleaner we used to use once told me that another (very respectable) firm he worked for not only took 10% off him, but also had him cleaning their office once a week free of charge. I asked him why he agreed to these terms and he said, "because they give me lots of work".
There is a country wide Agency who take 10% off contractors without the Landlord knowing...in addition to the 10% they do charge
WH Brown get 10% kickback from their contractors in return for recommending them. They deduct 10% off any invoices before paying the contractor. (We had one gardener with 600 of invoices who they deducted and then told him after they were taking 10% off leaving him out of pocket). Therefore the contractor just adds the extra 10% and the Landlord doesn't notice the rip off. Simple. Just rip the client off.
Well name names.
Otherwise it just looks like a crap press release...
Monjack has very questionable maths but he makes a good point. No commission should be taken without the landlord's agreement on repairs. We don't add any mark up to repairs at The Letting Office