Letting agent fees for landlords

Many landlords prefer to get help managing their rental properties, relying on letting agents for a wide range of tasks. At the simpler end of the scale, you might use an agent to find tenants for you or to take care of rent collection. Alternatively, you can ask a letting agent to provide a full property management service, drastically reducing the time you have to invest in your portfolio. However, letting agents come at a cost, and their fees can vary significantly.

In this article, we look at the costs you’re likely to incur, and the fees agents are still allowed to charge your tenants. We also help you determine whether a letting agent is right for you.

• What fees do landlords have to pay to letting agents?
• How much are letting agent fees for landlords?
• What are letting agents responsible for?
• Are letting agents responsible for their tenants?
• Who pays for repairs in a rented property if it’s managed by a letting agent?
• What is the letting agent fees ban?
• Can letting agents charge fees to my tenants?
• How do I choose the right letting agent for my circumstances?
• Do I need a letting agent or can I manage my rental myself?
• Can a landlord leave a letting agent?

What fees do landlords have to pay to letting agents?

The fees you need to pay a letting agent depend on which services they provide you with. There are three main services, each attracting a different level of fees. These are:

• Tenant-finding services – the letting agent will be responsible for advertising your property and showing potential tenants around. This package of services also usually includes reference checks, arranging contracts, collecting the deposit, and the first month’s rent.
• Rent collection – as well as tenant-finding services, letting agents can also be responsible for rent collection.
• Full management services – if you prefer to be a hands-off landlord (or don’t have the time), letting agents can manage every aspect of your rental, including chasing up rent arrears and arranging maintenance and repairs.

Letting agents also offer additional services, which we’ll cover later in this article. First, let’s look more closely at the fees you’ll pay for their key services.

 

How much are letting agent fees for landlords?

Fees vary from letting agent to letting agent. Below is a rough guide to what you should expect to pay for their main services.

• Fees for finding tenants. These fees can vary wildly. Some agents will charge a one-off fee in the region of £700 to £1500. Others will ask for a single fee equivalent to two to four weeks’ rent, or they may ask for a proportion of the monthly rent. This can be anywhere between 4% and 13% per month.
• Fees for rent collection. These fees are normally a proportion of the rent collected. Be prepared to pay between 5% and 10%.
• Fees for full management. These fees are more expensive as you’re outsourcing most aspects of rental management to an agent. Many will charge you in the region of 20%.

 

How do I know if the fee is reasonable?

The best way to gauge whether a fee is reasonable is to compare what different letting agents charge. You may need to do some calculations. For example, a one-off fee of £1,500 for finding a tenant is likely to be expensive if your rent is only £1,000 per month. In such a case, paying a fee of 4 weeks’ rent (£1,000) will save you money. On the other hand, if your rent is £3,000 per month, the single fee of £1,500 will be more attractive.

Remember, fees will only ever be good value if you receive a good service. Before hiring a letting agent, always do some research to find out how other landlords rate them. A good place to start is with rating sites such as Trustpilot, and it’s also worth talking to other landlords, whether in person or online (such as in landlords’ groups on social media).

Also, look out for extra charges not included in an agent’s main fee. Some letting agents may charge a higher fee but will offer you more for the money.

 

Can I negotiate with a letting agent?

Yes, you can certainly negotiate with letting agents. Some may be willing to offer you lower fees rather than lose you to a competitor. You could also offer to take care of some aspects of the service yourself. For example, you could ask for a full management service but take care of rent collection yourself, which may result in lower fees.

If you have several rental properties, letting agents will often offer you better rates rather than risk you taking your portfolio elsewhere.

 

What is the average letting agent fee?

It’s difficult to pinpoint an average letting agent fee. This is because fees can depend on many factors, including the level of service, location, the size of your portfolio and whether the agent is independent or part of a larger group.

To find out the average letting agent fee, search the web for letting agents in your area and compare the fees charged for the level of service. Various online services allow you to compare letting agent fees.

 

Can I claim back letting agent fees?

Yes, letting agent fees are tax deductible. Whether you use a letting agent to find a tenant or opt for a full management service, you can claim the expenditure back against tax. For more details, see our detailed landlord tax guide, and you may also find our article on paying tax on rental income useful.

What are letting agents responsible for?

Letting agents have different responsibilities, depending on the service level you agree with them. Even for a straightforward tenant-finding service, most agents do more than simply find a tenant. They will often also take care of referencing checks and contracts, and collect a deposit and the initial month’s rent.

When it comes to full management services, agents offer different levels. Normally, these services include tenant management, rent collection (and chasing arrears), property inspections and managing property maintenance.

That said, some agents will charge you additional fees for certain services. These include:

• Check-in and check-out reports, including an inventory.
• Managing specific landlord obligations and responsibilities such as gas, electrical, and fire safety checks.
• Dealing with emergency repairs like a broken-down boiler.

It’s always wise to ensure you’re clear about what’s included in the fees before agreeing to a service. You’ll normally find that the best letting agents are happy to point you in the right direction when it comes to landlord insurance, and some may take out rent guarantee insurance in their name so they can offer a guarantee to you as part of their managed service. Bear in mind that the vast majority of letting agents are not authorised to arrange or give advice on insurance, so if you get the impression they are, you should double check this with them (or check the FCA website to see if they are authorised).

 

Are letting agents responsible for their tenants?

Letting agents are responsible for what a landlord contracts them to do. This can include taking responsibility for tenants in different ways. For example, the agent may take care of tenants’ maintenance requests, ensure tenant data is kept in accordance with the UK GDPR and undertake necessary tasks, such as doing a legionella assessment and ensuring the property meets fire safety rules.

It’s worth remembering that the ultimate responsibility for tenants usually lies with the landlord. For example, if a letting agent is asked to undertake an electrical safety inspection and fails to, the landlord is still legally liable. Similarly, if an agent doesn’t undertake a Right to Rent check or fails to protect the deposit in a government approved deposit scheme, the buck still stops with the landlord.

In short, while letting agents are responsible for dealing with tenants in many ways, landlords need to ensure they hire reputable agents who comply with legal regulations, as ultimately, the responsibility from a tenant’s point of view lies with the landlord.

 

Who pays for repairs in a rented property if it’s managed by a letting agent?

Landlords pay for repairs to their rental properties. However, if they provide a fully managed service, some letting agents will use their preferred contractors to undertake repairs. If you allow an agent to organise repairs, set a spending limit so they have to notify you if the repair costs more. You can also ask agents to give you a choice of contractors or to work with your own preferred tradespeople.

What is the letting agent fees ban?

Since introducing the Tenant Fees Act 2019, the fees that landlords and letting agents can legally charge tenants have been significantly curtailed. This act is sometimes referred to as the ‘letting agent fees ban’.

Can letting agents charge fees to my tenants?

The Tenant Fees Act applies to all assured shorthold tenancies (AST), student accommodation and tenancy licences (see our guide to different types of tenancy). It sets out what are permitted payments and what are prohibited payments.

Prohibited payments include services that letting agents frequently charged tenants for in the past. These include viewing fees, check-in and check-out fees, plus third-party fees such as for tenant referencing. Asking for a prohibited payment can lead to a fine of £5,000 for a first offence and penalties of up to £30,000 – or even criminal prosecution – for subsequent offences.

The Tenant Fees Act 2019 states the only fees that can be charged are:

• Rent
• A refundable tenancy deposit (capped at five weeks’ rent or six weeks if the annual rent exceeds £50,000)
• A refundable holding deposit (capped at one week’s rent)
• Payments to change the tenancy agreement (if requested by the tenant, capped at £50)
• Payments associated with ending the tenancy early (essentially loss of rent and remarketing costs)
• Payments for utilities, communication services, TV licences and council tax (if not included in the rent)
• Interest for late payment of rent (when 14 days in arrears or more, capped at the Bank of England base rate plus 3%)
• A fee for replacing keys or security devices that allow access to a property.

Any other payment requested from a tenant by a letting agent is now illegal. You can find full details of the act here. As mentioned earlier, letting agents aren’t normally authorised to arrange or give advice on insurance, so you should never see a separate cost for insurance in the charges you pay them.

 

How do I choose the right letting agent for my circumstances?

Competition for your business will be fierce, so it can be well worth comparing packages from a few letting agents before making any decisions. Considerations to bear in mind include:

• The number of properties you have – if you’ve got several rentals or a mixed portfolio of residential and commercial properties, it might be worth looking for agents with experience managing multiple lets with different uses. Similarly, a letting agent with branches nationally can be a convenient choice if your properties are dotted around the country.
• How experienced you are – how comfortable you are with managing your let properties will determine the level of service you choose to pay for. If you don’t want to manage the property at all, an agency with a large team could cover all aspects of your let, or you may choose just to pay for a tenant-find service.
• The type of property you rent – some letting agencies and estate agents focus on particular rental markets, which could help you market your let more successfully. This could be a sensible choice if you have a specific type of property like an HMO or student let.
• Value for money – this can be hard to gauge, but you should feel that the services you pay for are worth the expense. Think about how quickly issues are dealt with and how fast your agent responds, and weigh this up compared to managing the let yourself.
• Recommendations – if you don’t know any landlords to ask personally, check online reviews and testimonials. Landlord forums can also be a valuable source of information.
• Check credentials – letting agents can choose to join various trade bodies, which also means they agree to abide by certain standards. In the UK, the main trade organisations for letting agents are:
  • Propertymark (this organisation brought five associations together under a single brand: ARLA, NAEA, NAVA, ICBA and APIP)
  • UKALA (UK Association of Accredited Letting Agents)
  • Safeagent (previously the National Approved Letting Scheme)

 

Do I need a letting agent or can I manage my rental myself?

It’s entirely up to you whether or not to use a letting agent. If you do decide to go it alone and manage the entire letting process yourself, you’ll need to think about your landlord obligations and responsibilities as well as the associated costs of being a landlord, including:

• Advertising for tenants – consider how you’ll reach potential tenants. For example, are you targeting students, young professionals, or families? Knowing who your ideal tenant is can help you find the best marketing platform.
• Background and credit checks – it’s your responsibility to carry out all the appropriate checks and, in particular, to ensure your tenant has the right to rent in the UK (i.e. is over 18 and able to legally reside in the UK). By law, you must check all prospective tenants. You should also ask for previous landlord references or an employer reference too. It’s vital not to skip checks as it can help weed out potentially troublesome tenants.
• Tenancy agreements – you’ll need to organise a tenancy contract that establishes the specific terms and conditions for renting your property. You can find templates from one of the letting agent trade bodies, which you can use word for word or adapt. Whatever you do, you must be sure that none of the conditions contradicts tenants’ legal rights as set out in the Housing Act 1988.
• Deposit protection – you’ll have to secure your tenant’s deposit in one of three schemes: Deposit Protection Service, mydeposits, Tenancy Deposit Scheme (different schemes apply to Scotland and Northern Ireland).
• Inventory and maintenance – it’s also a good idea to have an inventory for your rental property that lists anything you provide, particularly if you’re providing a fully furnished let. A check-in and check-out report is also useful for documenting the property’s condition before and after the tenancy ends. Don’t forget – fair wear and tear is to be expected and something you cannot penalise tenants for. You’ll also need to decide on a process for dealing with maintenance issues so that problems can be resolved effectively.
• Regulation changes. Regulations and legislation concerning being a landlord changes regularly, and it can be hard to keep up to date. A letting agent will keep you up to date with any changes that may affect you.

 

 

Can a landlord leave a letting agent?

Yes, if you want to leave or switch letting agents, you’re entitled to do so. You’ll have signed terms of business with the agent, including a termination clause with a notice period that you have to adhere to. Often this is three months, but it can vary.

 

Once you’ve decided on whether to use a letting agent, you’ll need to decide on the level of service you need. To help you, we’ve compiled a useful download of our landlord checklist to help you make sure you’ve got your legal requirements covered and have the right procedures in place for effective property management. Even if you outsource much of the management to a letting agent, there are still things you’ll need to take care of, such as registering as a landlord (in certain parts of the UK), ensuring a property is fit for human habitation, and deciding how best to handle repairs and maintenance. You also need to ensure you have the right landlord insurance to protect your investment.

At Alan Boswell Group, we understand that if you’re letting out property, it’s important to protect your assets – whether you use a letting agent or go it alone. Our award-winning insurance products can provide peace of mind and the support you need to deal with the unexpected. For more information, visit our landlords insurance hub or speak to an expert member of the team on 01603 216399.