We are at the beginning of the end for let only tenancies which have effectively been subsidised in the past by tenants fees, according to a property management company.
The ban on tenants’ fees which kicked in at the start of summer will lead to an industry-wide re-appraisal of Let Only according to David Alexander, joint managing partner of Apropos.
“Agents, prior to the ban, were able to offer a reduced rate for this service because they were subsidizing their income with tenants’ fees. Now this has gone agents will no longer be able to offer such low charges so it’s inevitable that they will be putting up these fees. Some agents may take longer to appreciate this shift but all will have to change unless they want to run their business at a loss” he says.
“A recent survey reported that many agents are facing a gap of between 10 and 25 per cent of income and they must adapt to the new way of working or find their business failing” he continues.
Alexander says many landlords who favoured Let Only tenancies are quitting the market due to tax and regulatory changes.
“Agents which increase charges for a Let Only service will only exacerbate the financial issues these landlords are already facing. Change is inevitable in all markets and the companies that adapt to the new business environment will survive while those who bemoan the passing of previous systems will perish” he says.
He says the key for agencies wanting to succeed is to adapt.
Scotland - where a tenant fees ban exists - appears to have a more stable rental landscape, he suggests, with the best agents changing their business model accordingly.
“The number of companies entering formal insolvency procedures involved in real estate activities in Scotland fell in 2018 to its lowest figure since 2007 with just 17 companies going bust during the whole year.
“By contrast the number of real estate companies failing in England and Wales reached its highest level in four years in Q1 2019 with a total of 121 and the year as a whole looks likely to be similar to the previous peak which occurred during 2014 when 522 companies entered insolvency.”