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Fees Ban will prompt lettings revamp, says property management firm

The ban on tenants’ fees beginning on June 1 presents an opportunity to overhaul the private rental sector, says a property management firm.

Mark Neighbour of Mcilroy Smith says agents could use the ban to boost the status of the sector.

“Combined with requirements for qualifications, this will also hopefully go some way to improve the negative view of lettings professionals and instead allow managers to be seen as a qualified professional service - which the majority are” he says. 


“The evolution of the ‘high street agent’ has been clearly on the horizon for many years now…The fees ban is just the next mechanism which is driving this change. I believe the business needs to change to meet the new challenges raised by legislation and changes in technology but also to improve the way qualified agents are viewed.  

“Clear transparent pricing based on service is the best way to accomplish this and show both tenants and landlords that they are working with a professional and ethical company.”

But he warns that if most agents charge higher fees to landlords, this would drive up rents.

“We do not think that it has to mean rent increases for the tenants in general” he says. 

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    In the good old days, the agents were charging landlords minimum 8% for letting fee. With the flooding of the market with too many letting agencies, the landlords started to bid for the cheapest letting agents to let their properties with. Agents in turn started to outbid their rivals by cutting their fees to the bare bone. However soon they realised that by offering the cheapest service does not help them making a decent living. Some were even offering no commissions. In order to recover their losses from the reduced fees they offer to landlords, they started to target the tenants. That is why the whole situation has turned out the way it has. There is no science in this.

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    • 15 March 2019 10:29 AM

    There will be mass consolidation in the LA industry.
    Far fewer LA are required.
    Those that remain need to have far larger numbers of property under management.
    In any town you only need one LA.
    The problem is that there are no barriers to entry.
    You can literally walk out of prison and start up as a LA.
    Clearly there needs to be compulsory qualifications for LA.
    Many LL will not accept higher charges and will terminate LA contracts.
    There are savvy LA businesses out there that by clever business are are able to keep the management charges the same despite losing tenant fee income.
    These are the LA that will survive the cull that is coming.
    The added advantage for these savvy LA is they will pick up business from the culled LA which is predicted to be about 20% of LA.
    Those LA remaining will be the ones truly on their game.
    Those LA dependent on tenant fee income for survival and they know who they are would do well to extrcate themselves from being a LA by selling up or amalgamating with possibly other similar LA so that existing management fees without tenant fee income still provide a viable business.
    I can walk to about 6 LA.
    All unnecessary when 1 would suffice!


    Hello Paul, interesting comment but, I will just say (as you do) that not all LA are the same.

    We have survived for many years without over charging tenants obscene fees and do very well and while any increase in the level/numbers of property managed is always welcomed, it is not essential to us as we have never relied on the fee income to make our business viable.
    For us, this tenant fee ban is an opportunity to increase our own level of business because, as you quite rightly say, there will be several agents that will no doubt look to increase their charges to Landlords and hopefully off the back of that, Landlords will begin to shop around and will then discover that not everyone is out to charge for absolutely everything. So, I would like to think that we are one of those "savvy businesses" that you refer to.

    I do however disagree with you that you only need 1 LA for every town. Competition is good, it is what keeps us all on our toes and I thrive on it. Having one agent have the monopoly in their town would be a disaster as they could charge whatever they wanted and not provide any quality of service. We operate in a small seaside town and there are 15/16 of us here that offer lettings. Some like us that have been established for years and others that are only just getting in to it. I believe that in a year, 14 of us will still be operating, but it will be interesting to see.

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    • 16 March 2019 12:28 PM

    Yep perhaps I should have stated 2 LA are all that is needed.
    As I indicated which you confirm not all LA are the same.
    Clearly to remain viable without the cushion of Tenant Fees will be a bridge too far for many LA.
    Clearly you aren't one of these LA.
    But I suggest that savvy LA like you are in a minority.
    As you were aware of the impending Tenant Fee ban I'm sure you have devized other methodologies to maintain profitability.
    This makes being a professional LA a lot harder work but is perhaps no bad thing.
    Rather than being dependent on tenant fee income I believe it is useful for LA and LL alike that the LA isn't a one trick pony.
    Multiple income streams is where its at.
    Few LA have developed sophisticated business models and it is they who will come a cropper.
    For LA who do manage to retain LL with increased management costs to cover for loss of tenant fee income inevitably this will result in higher rents and this will translate to the whole of the lettings market.
    This actually will mean more profit for those LL who DON'T use LA.
    Essentially self-managing LL will be riding on the backs of LL that choose for whatever reason to use a LA.
    Such self-managing LL might choose to slightly undercut those LL using LA which really sticks it to them.
    They would be doing all of the heavy lifting in increased management charges and may not attain the tenants via that particular LA.
    We only have to look at the Scottish experience to see the effects of their tenant fee ban.
    Rents increased substantially.
    This will now be addition to LL increasing rent to pay for S24
    My rents are increasing by 7% just to pay for a RTI and S24.
    If I was paying a LA my rent would need to increase by about 10% per year at least until the maximum S24 period.
    Rents can only increase and if not possible then LL will need to sell.
    Somehow I doubt there will be any shortage of tenants willing to pay whatever the LL requires.
    With an ever shrinking PRS tenants will be desperate.
    Gone are the days of picking and choosing a rental property.
    To be successful a tenant has to move fast to obtain a tenancy and that will only happen if they can qualify for one.
    Many LL like me are very picky who we take on for obvious reasons!!!
    But the life for a LA is going to be very difficult.
    For LA such as yourself you seem well placed and fully aware of what you need to do to stay in business.
    I suggest LA like you are a rarity.
    We shall see after June 1st what happens!!!
    I very much doubt that there will be 16 LA for long where you are.
    The problem for you LA is you will have to pay for Multiple referencing from chancers who now can apply for as many properties as they like with no cost to themselves
    This is not viable.
    I'm surprised that LA aren't adopting the TRP methodology.
    This so that essentially the LA NEVER pays for any tenant referencing again.
    The tenant is told to go away and apply for their TRP from LRS and then return allowing FULL access to it by the LA.
    This will mean that one TRP can be touted around as many LA and LL as the tenant desires.
    No other referencing would be required.
    Those with the best TRP will get first choice and even more so if a TRP qualifies them for RGI.
    These would be the Gold Standard tenants.

    S l
    • S l
    • 16 March 2019 15:02 PM

    hi whats TRP and LRS?

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    • 16 March 2019 15:19 PM


    Tenant Referencing Passport

    LRS is


    No LL or LA need pay for any referencing.
    All aspirant tenants should be advised that they will NOT be considered unless they obtain their TRP.
    They then facilitate full access to the TRP for LL and LA.
    The TRP is valid for 3 months and only costs about £60
    Therefore NO LL or LA need ever again pay for referencing.
    Tenants will just be told that for them to even be considered they will need their TRP.
    This is NOT the same as a LA or LL requiring a tenant to have referencing.
    If they DON'T wish to be considered then all a tenant has to do is NOT obtain their TRP.
    Then they won't even be considered.
    Every tenant has the choice not to be considered!
    A tenant cannot force a LA or LL to pay to reference them.
    My advert for tenants will be something like this

    Subject to status
    All tenant applicants if they wish to be considered will need to present a LRS TRP to the LL.
    If they refuse to do so then such tenant applicants will NOT be considered.
    This LL requires referencing but is not prepared to pay for it.
    Therefore it is a choice to be made by the applicant as to whether they wish to be considered.

    £60 is the only cost for a tenant for their TRP.
    A TRP will be a one off cost for the tenant who can then tout it round to any LL ir LA they like.
    Having an excellkent TRP which might be so good that RGI is possible will facilitate that tenant being given fist chouce over other tenants who DON'T have such a good TRP.
    A good tenant will be motivated to always be good as possible to have a blemish free TRP.
    Plus their details will be registered with LRS so that previous LL may be contacted to confirm TRP status if deemed appropriate.
    The TRP is the way ALL referencing should be managed.
    It is up to the LL if they wish to carry out further enquiries.
    But the TRP should change tenant behaviour as it will be recorded on any TRP.
    Gone will be the days of mugging off another LL because the previous LL can't becontacted etc.


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