It’s confirmed – the tenant fees ban will be introduced on 1 June 2019. Here’s how it might be an opportunity for estate and letting agents, rather than a hindrance.
- Tenant fees ban: estate agency reveals how they’ll cover costs
- Best buy-to-let areas in the UK for 2019
- GDPR mistakes: the small business errors that could lead to a fine
- Do I need professional indemnity insurance?
While the tenant fees ban has been positively received by tenants, questions remain over how estate and letting agencies will cover the legitimate costs of doing business.
David Cox, Chief Executive of ARLA Propertymark, believes the move will backfire, with tenants actually ending up worse off once the ban comes into force.
ARLA Propertymark have been among the most vocal opponents of the ban, saying it will cost the sector jobs, make buy-to-let less attractive, and force tenants to inadvertently pick up the costs.
Amid this uncertainty, are there actually any opportunities? We’ve uncovered five ways the tenant fees ban might actually help your business, rather than hinder it.
Tenant fees ban: when does it come into force?
The government will introduce the tenant fees ban on 1 June 2019. They’ve said they’ll publish guidance for letting agents, landlords, and tenants in the spring, which doesn’t leave lots of time for businesses to prepare for the change.
With guidance still due to be published, estate and letting agents should be doing all they can now to review how the tenant fees ban will affect their business.
First on the list is to analyse how the change will impact your current income. Then you can start looking at any opportunities your estate and letting agency might be able to capitalise on.
How the tenant fees ban may help estate and letting agents
1. The chance to improve relationships
A tenant fees ban has already been in place in Scotland since 2012. Questions remain over how effective it’s been – Shona Hay of Belvoir Letting Agency told the BBC that they simply had to absorb the costs and that, as of 2016, they were continuing to take a loss.
But a family-run property management company north of the border believes the tenant fees ban has been beneficial for improving the relationship between landlord, tenant, and letting agent.
David Alexander, of DJ Alexander Ltd, said: “Too often this relationship has been confrontational and divisive with each side pitted against the other.”
His brother, John Alexander, believes that while landlords may be charged more, in Scotland “the best agents and the best landlords adapted and realised that this was fairer for the tenant and, in the long term, created a better relationship between the two.”
2. The chance to explore new services
ARLA Propertymark’s research found that tenant fees generate £700 million per year (roughly 20 per cent of the industry’s turnover), so the tenant fees ban will likely have a huge impact on income.
What’s clear is that after analysing current revenue streams, agents might want to consider new ones. This could involve looking at different ways to gain customers and make your business stand out.
Jon Notley, CEO of Zero Deposit, gives the example of East Sussex-based agent Oakfield. Oakfield have seen a 26 per cent boost in tenant and prospect clicks on properties where it’s offering the Zero Deposit deposit replacement scheme.
With the introduction of the ban now less than four months away, are there any services you can offer that will further add value to both landlords and tenants alike?
3. The chance to improve efficiency
The upcoming ban means that businesses need to look at how they can improve efficiency elsewhere to offset lost income.
Eleanor Harvey, writing for BuyAssociation, mentions that proptech is something that “could help agents cut costs in preparation for the changes.”
Proptech may be a buzzword, and difficult to keep track of – Graham Lock of the Federation of Independent Agents last month noticed a proptech directory that listed 600 businesses.
A new directory of ‘Proptech’ providers of services to estate agency has just launched, with over 600 different businesses listed! Estate Agents must be suffering from supplier fatigue. Where do you even begin? most agents haven’t got the time.— Graham Lock (@grahamlock_FIA) January 8, 2019
But adopting new and relevant technology can lead to improved efficiency, a reduction in costs, and an increase in profits. Ultimately, better efficiency should also lead to a better service for customers, helping you stand out among your competitors.
Graham Lock, in a webinar hosted by proptech firm Goodlord, said: “Now is the time to review all your processes and what you’re doing with technology. If you do nothing you risk not innovating as an agency.”
4. The chance for new marketing tactics
If you’re looking to new revenue streams and different ways of improving efficiency, it might also be a great opportunity to reconsider your marketing activity.
If you’re adding to your overall offering, or making brilliant changes to your processes, it’s worth shouting about – think about using email newsletters and social media.
More widely, it could also be the ideal time to look at your brand and whether it could do with a refresh. Does it match up to where your business is now?
Partnerships in your local community could also improve your overall offering. They’re often a great extension of your marketing activity – and working with businesses you trust can help you offer the best service, whether they’re gardeners, removal services, or tradespeople.
Read our article for ideas on advertising your small business.
5. The chance for high-quality agencies to thrive
Neil Cobbold, Chief Operating Officer of proptech firm PayProp, thinks that the gap between the top and the bottom end of the market will reduce after the tenant fees ban.
Writing in Estate Agent News, he claims that many agents have been subsidising very low management fees with revenue from tenant fees.
When they can’t charge tenant fees any more, costs are likely to increase, and landlords will want the best service. Cobbold says: “As costs rise and value for money becomes more important, a letting agency which is on top of crucial issues such as payments, rent arrears and property maintenance will become more indispensable than ever to landlords.”
While Cobbold believes the tenant fees ban is clearly a “bump in the road” for agents, in the long-term he feels the best ones will be ready – and able – to adapt to the change.
Are you ready for the tenant fees ban?
It’s clear the tenant fees ban will have a huge effect on the industry. Now it’s confirmed for June, it’s worth thinking about each of these five points and making whatever preparations you can.
What’s your business doing to get ready for the tenant fees ban? Let us know in the comments below.