Well I would say ‘no’ because I am a letting agent. But why? If you really want to hear the point of view of an experienced, qualified and regulated letting agent and have a few spare mins it is all below…
Reading the papers only to form your opinion this entire industry should be lined up and shot, and while you’re at it you can throw in anyone who is overweight, uses plastic, immigrants, Landlords, certainly anyone who ends up in the Daily Mail, but never, ever journalists. They only write 100% fact. Ironically their trust rating is the same as Estate Agents in the 2017 Ipsos Mori rating system.
Before I start I am sorry if this comes across as a bit of a rant. I am just sick and tired of seeing the industry I have worked in for 18 years being continually bashed by lazy journalism and Govt policy looking to win votes. If no-one reads this I will at least feel a little better for getting it all out 🙂
The good, the bad and the ugly
Who can think of an industry where 100% of its representative businesses provide a 10/10 service? Lettings is like all others, there are the great ones, good ones, bad ones and awful ones. If you just read the papers it’d probably be a 0%, 0%, 25%, 75% split. Working within the industry my gut feel is more like 20%, 55%, 20%, 5%.
Believe it or not you can set up a lettings business without any experience or qualifications. The Association of Residential Letting Agents (ARLA) is the main regulatory body for this industry, it is not a legal obligation to join nor is it cheap either at £230 PA per member and £500+ for an annual accountants audit – our last one was £960. Once a member you must follow strict guidelines, have a complaints procedure, join the Property Ombudsman Scheme, join the Client Money Protection Scheme (CMP) and only use the Tenancy Deposit Scheme for Tenant deposits. So you could say that any letting agent who is a member wants to do things the right way rather than has to. Approx 9,000 out of 12,000 UK letting agents are members of ARLA.
ARLA understands there is a minority of ‘rogue’ letting agents undermining the whole industry and has lobbied the Govt for years to make membership of an ombudsman scheme a legal obligation so Tenants and Landlords had a route to financial redress should they need it. This is now law. ARLA have also been lobbying for years to make CMP a legal requirement in order to protect Landlord and Tenant funds held by agents and this will soon be law. Finally they have been lobbying for agents to require a qualification in order to practice and this too may soon be law. Hallelujah. Sadly it is not ARLA or the 9,000 member agents who are likely to end up in the papers, it is the ones providing an awful service, offering sub standard property and charging often ridiculous fees. Like the contractors in that Rogue Traders TV programme, most I have worked with are great and I doubt have ever been in the papers, one or two I have come across over the years could easily have been on that show.
The Housing Minister Heather Wheeler attended the recent annual ARLA conference confirming the above, and more.
Why are there service and supply related problems?
Following the start of the credit crunch the housing market crashed in 2008-2009 and most estate agents were facing financial uncertainty. Many already had small letting departments to mop up referrals from investors buying property, generally they were an afterthought though (I have worked in a few of those). Those estate agents without a lettings dept suddenly saw the regular income they provide was a great way to ensure survival.
Now anyone can do lettings right? It’s easy right? Well, in my unlearned opinion being an estate agent involves phoning, emailing, showing property, knowing the market, knowing a few pieces of legislation, negotiating deals, Money Laundering checks, pushing them along with the vendor, buyer, conveyancer, mortgage broker, dealing with problems as they come along, popping the champagne at the end with a massive pay off. Lettings is phoning, emailing, showing property, knowing the market, negotiating deals, pushing them along with the Landlord, Tenants (totaling 1, 2, 3, 4, 5…), Guarantor/s, referencing agent, inventory clerk, gas safe engineer, electricians, cleaners, all manner of other contractors depending on the agreement, Money Laundering checks, Right to Rent checks, dealing with problems as they come along, getting the paperwork signed, getting the money in on time, registering the deposit, assisting Tenants with utilities, forwarding certificates to Tenants and Landlords, for the majority of Tenancies we then manage the maintenance day to day with a general expectation to deal with problems immediately no matter how big/small, dealing with major maintenance issues and out of hours emergencies, collecting and forwarding rent, dealing with arrears, renewing the Tenancy, arranging the check-out, dealing with the deposit returns and sometimes disputes. There are at least 14 pieces of legislation to follow to set up a standard let, not including all those in the Tenancy Agreement, we have to know the law inside-out as many carry the potential for financial penalty, imprisonment even for some. Looking at the difference you can see why a number of estate agents have not done the job so well, along with the existing below par businesses you would expect to find in any industry. But the great and good ones just carried on being great and good without a whiff of a news story.
Something to bear in mind, when the Tenant Fee Ban comes into play in APR-19 we will be expected to provide the same service for roughly 15-20% less revenue.
Now back to the market, lets say you have stalls selling apples where there will be a common going rate. If there is suddenly a shortage of apples the demand essentially rises, the consumers are likely to be willing to pay more to secure their apples and so in turn the vendors increase their prices across the board. If you heard Bob got an extra £1 per pound at his stall then you would too wouldn’t you? This supply and demand approach is pretty standard in most markets. In 2009 due to a sudden inability to obtain credit there was a dramatic shift from buying to renting which created an on-going lack of stock and year on year rental increases until pretty much the present day. At the time I had never seen a market like it, some letting agents will be young enough to think the market has always been like this! So, in my opinion, the main driver for rental increases was the lack of stock and increasing demand following the credit crunch, not greedy Landlords and letting agents. Our job is to maximise the return on our client (the Landlord)’s investment, and that is what happened before 2009 and is still happening now.
The anti-Landlord/Letting Agent legislation
Anyone who knows me will tell you I love stats and a nice graph. Below we can see dwellings in the UK from 2001 – 2016. Home ownership has stayed roughly the same the whole time. The BIG change has been the Private Rental Sector (PRS) going from 2.1 million to 4.4 million dwellings, or 12 million voters Tenants.
Due to continual negative and often inaccurate press about rising rents (see apples), Tenant fees (charged since the 90’s), high deposits (generally 6 weeks for the last 10-15 years) and lobbying by not-for-profit charities such as Shelter and Generation Rent (Google their employees salaries, I dare you) the Govt quickly realised the PRS was a great punch-bag for diverting bad PR and also staying in power. Well, that’s my opinion anyway.
Although now it is fact that many Tenants choose to rent as a lifestyle choice many are desperate to be first time buyers (FTB) but were stuck in the PRS and genuinely needed assistance to get their foot onto the property ladder. The Govt first tried with the Help to Buy scheme but only managed assisting approx 20,000 FTB over each of the 4 years it existed. Eventually I expect the Govt had a meeting and agreed the lettings market was perfect to get what they like best – tax and votes – while appearing to help Tenants and therefore FTB. So first came the Stamp Duty Land Tax surcharge of 3% for any second home. Anyone (including Landlords) buying a home other than their own residence would have this applied. £625 million in extra revenue was forecast, £2 billion is what they got. Every table at the Houses of Parliament restaurant got its own bottle of HP sauce after that.
Then came the big one – Section 24 of The Finance Act 2015, a charming piece which meant Landlords with mortgages could not offset the interest against their income tax. Essentially it meant being taxed on turnover rather than profit, the only business model in the UK taxed this way. This was confirmed in NOV-16 and came into effect in APR-17. I do not have any stats yet on the revenue this has generated for Govt, there are approx 400,000 Landlords with mortgages in the UK so I expect it will be fairly juicy. Funnily enough Landlord investment fell off a cliff from NOV-16, stock reduced and, well, guess what happened to the price of the apples?
Next up is the votes, remember the 12 million Tenants? For their side of the service Bishop Sullivan set up and progress references through a referencing agency which creates a third party cost and a cost in time to us. We then create the Tenancy Agreement, it is 18 pages long and has 21 sections which are not automated (see “You just hit print don’t you” type comments). We are liable for any mistakes we make and I can guarantee you a Tenant is just as likely to seek reimbursement for a mistake as a Landlord would be. Finally we arrange the professional inventory check-in which also creates a third party cost and a cost in time to us. We feel each of these parts of the move in process relates directly or in part to the Tenant and so apply a charge. The average fee for one Tenant in Brighton & Hove is £240 inc VAT, Bishop Sullivan charge £210 inc VAT. I have seen some disgustingly high fees locally also, the highest is £400. The vast majority of agents are around the £240 mark though, some charge lower than £210, some charge nothing at all.
I have been running this business for nearly 3 years and we are doing well after a lot of hard work, long hours, pain, fear and self-doubt. Common amongst business owners I feel! Our fees for Landlords and Tenants are below average and we embrace modern technology to make the process as easy as possible, such as digital signing for contracts and a very useful app. Everyone seems to like the service, we have a 4.9/5* Google rating (the top 8% of 103 local letting agents don’t you know). The Tenant Fee Ban could put the business in serious peril as we and the vast majority of agents will be losing somewhere between 15 – 20% of our revenue overnight (APR-19). Most agents will have these choices:
1. Reduce staff
2. Reduce the service to Tenants
3. Increase fees to the Landlord
4. Sell to a larger agent
Larger agents are likely to choose 1, 2 & 3. We are likely to choose 2 & 3 as we are an independent with a low number of staff. I cannot see many agents being able to ignore 3 in which case Landlords will want to cover their costs and in turn increase their rents. So Tenants will likely suffer a reduction in the service they receive and end up paying the equivalent of agent fees every year to the Landlord instead of to the agent only when they move. You can see why so many agents are skeptical about this working, but I would expect the votes for a jolly good Govt looking after Tenants will have been cast well before those clever journalists catch on and start reporting their 100% fact stories. Rest assured it will all be our fault which I have already accepted.
Anything else for Landlords?
Locally due to councils having their budgets reduced year after year licensing schemes are becoming more and more common which is a further financial burden on Landlords. Brighton & Hove County Council (BHCC) are proposing a licensing scheme covering an additional 27,000 properties to be managed by a small team of staff, how I have no idea, perhaps it is all about paying wages? Incidentally with a minimum suggested fee of £420 per property it will generate them approx £2.3 million per year over 5 years which equates to roughly 80 x £30,000 salaries. Hmmmm. BHCC stated in their NOV-16 report here (based on a paid for third party report here) the scheme is required to combat anti-social behaviour which according to them is rife in this town. They also imply it is all based on theory anyway. Hmmmm again.
The overall result here is likely to be more Landlords leaving the market which will result in fewer properties to rent and guess what will happen to them apples? How does any of this actually help Tenants?
Homelessness
Homelessness AKA rough sleeping was touched upon in Govt’s 2017 Autumn Statement summed up by Homeless Link’s report. There are approx 4,218 homeless in Brighton & Hove as per Brighton & Hove News report in NOV-17, it is a major problem and rough sleeping has increased tenfold since 2010 (14 to 144). What are the main drivers here? ARLA suggest in their APR-18 report that the Govt’s Universal Credit scheme and the lack of affordable housing are two main factors adding to the issue. If you go back to the Dwelling Stock graph above you may have noticed that local authority (LA) housing has been decreasing while the demand for rental property has clearly been increasing. This is because LAs nationwide have been selling off their stock to raise funds for other sectors and have not been rebuilding 1 for 1 as is their obligation. This trend began in the 80’s under Thatcher, remember?
In summary
One of the most commonly used words in this post was ‘Govt’, I hope you spotted it. Whoever is in power has the ability to change our lives for the better or worse and I expect you know which one I think it is currently. There have been 16 Ministers overseeing housing since 1998 which shows the importance Labour and Conservatives give this role. To put it into football terms, the clubs generally at the bottom of each league have had the most managers and therefore the least continuity.
There also seems to be a misconception within the press about why Landlords are Landlords. They have generally worked hard, earned money and looked to invest it somewhere they can make a good return. Possibly as a nest egg for their children, to pay for family holidays, buy nice clothes, pay for mum’s care home. That sort of thing. Like any investor in any market they are definitely not in it as a charity so if rents go up, they will instruct or agree to put them up. If legislation changes result in losses they will look to recoup those losses from the rent and if that does not work they may decide to liquidate their asset and invest it into crypto currency instead (it’s all the rage darling). It’s a business and personally I do not see why hard earned money should be treated any differently.
I generally apply a 10% rule to society IE it is 10% that cause all the problems (also why we have the Police, no not the band). Contrary to what you may read out of roughly 100 Bishop Sullivan Landlords I would say there are 2 or 3 who can be reluctant to spend money on their property, the rest are very keen to ensure their Tenants are happy, the property is safe and in good condition. Over the 18 years in London and Brighton I’d say this has been a constant with the clients I have dealt with, so they buck my 10% rule.
The rant is now over. If you made it this far then all I can say is well done. For the few who are still awake and reading I hope you can at least see the other side of the coin. A coin which is getting harder and harder to earn so the best I can hope for is you are a Landlord and are thinking “Blimey this chap knows his onions and seems pretty reasonable so I will give him a go”. Or perhaps you are now armed with enough information to be brave enough to correct someone at a dinner party. I’d be happy with either 🙂
If you need any assistance letting your property in Brighton, Hove, Kemptown and surrounding areas or if you just have some general queries please feel free to contact us on +44 (0)1273 646426 or lettings@bishopsullivan.co.uk
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Best Regards,
