Letting agents can be useful, but they can also be expensive. Many landlords rely on them to manage their property, collect rent, or just find tenants – but what do letting agents do, and, crucially, what are the average letting agent fees for landlords?
Self property management or letting agent fees - Which is cheaper? - Find out the best buy-to-let areas in the UK - Buy-to-let changes: what you need to know - Why landlords should set aside £2k a year for property maintenance - What is landlord insurance?
What are letting agent fees?
Letting agent fees are payments that both landlords and tenants make to letting agents for the services they provide.
The amount charged and the services included differ from one letting agent to another, but typically landlords are paying the letting agent for things like tenant-finding, reference checks and property management.
The fees you pay will depend on the services you choose, and you may pay them as a flat fee or as a percentage of your rent.
How much are letting agents’ fees for landlords?
For a let-only service, letting agents tend to charge landlords around three or four weeks’ rent, while full property management fees may be around 10 to 15 per cent of monthly rent. Letting agent fees in London are often higher. On top of this, you may have to pay a setup or administration fee.
Different letting agent fees for different services
To begin with, you should remember that there are different levels of service that you might require from a letting agent. The first, most basic level, simply involves finding tenants and completing the referencing process, along with collecting a deposit and drawing up the tenancy agreement. The agent may also arrange the inventory in these cases.
The second level involves the agent collecting rent every month, and following up with any arrears. Some landlords choose to outsource this in order to avoid the hassle of chasing late payment.
Finally, you might opt for a full management option. Here, as well as the services listed above, the agent will take care of maintenance and repairs, and will act as the point of contact for your tenants.
Average letting agent fees for landlords
Clearly, the amount you pay will depend on the level of service you are getting, but this is a rough guide to the letting agent fees paid by landlords:
- Finding a tenant and arranging referencing will typically attract a one-off fee, but this can be as high as one month’s rent.
- Rent collection will generally be charged as a percentage of the rent, and will generally be pegged at around five per cent.
- Full management is also a proportion of the rent, but this service can attract a fee of up to 15 per cent of the monthly sum.
Changes to letting agent fee regimes
There has been a lot of news coverage in recent weeks about changes to the letting agent fee regime for tenants. At first glance, this doesn’t have much impact on landlords – but in fact, the implications could be significant. So what’s happening?
In the 2016 Autumn Statement, Chancellor Philip Hammond announced that the government would be banning letting agent fees for tenants, and that it would be doing so quickly. These fees have been controversial, and can see tenants paying hundreds or even thousands of pounds to secure a flat and have referencing completed.
However, there is increasing speculation that agents may simply pass the costs onto landlords once they are no longer able to charge them to tenants. This could have major financial implications for landlords, though many commentators believe that, if this happens, the costs will then be passed from landlords back onto tenants in the form of higher rents.
Do I have to pay a letting agent, or can I do it myself?
Of course, there is no requirement for you to have a letting agent at all. Many landlords choose to complete the entire lettings process themselves. Your choice here will depend on a range of factors, including your proximity to the property, and the level of service that you would otherwise need from an agent.
For example, if you simply don’t have the time to take on the management side, you might need to contract with an agent to ensure that maintenance tasks are completed. However, if you just need someone to look for tenants, you might well be able to do this yourself.
For more information, read about whether landlords really need letting agents.
Do you think letting agents are necessary for landlords? Let us know in the comments.