Protect lettings agency income post fee ban
It was almost one year ago that we last wrote in detail about the tenant fee ban. Back then, we discussed the impact and what agents could do to strengthen their business, with 11 months to spare.
Now, even with the ban imminent, agents who haven’t taken action can still implement changes and restructure their business to plug the financial gap, with research from Generation Rent suggesting agents will need to make up a £404 average on new tenancies and £117 for renewals.
What can agents still charge for?
Since that blog, the Government has clarified what agents can still charge tenants for. The below will help agents identify the tasks they can continue to perform but will no longer charge a fee for:-
- the rent
- a refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the annual rent is £50,000 or more
- a refundable holding/reservation deposit, limited to one week’s rent
- payments to change the tenancy when requested by the tenant, limited to £50, or reasonable costs incurred if higher
- payments associated with early termination of the tenancy, when requested by the tenant
- payments in respect of utilities, communication services, TV license and council tax
- a default fee for late payment of rent
- replacement of a lost key/security device, where required under a tenancy agreement
Reducing fixed costs and overheads
Limiting costs and expenses is clearly crucial in strengthening your lettings business, especially when income will affected after 1st June. These are 6 areas to consider when looking to improve cash flow:-
1. Optimise natural wastage – retirements and resignations can be viewed as opportunities. Rather than a knee-jerk recruitment reaction, take to time to evaluate how efficiently your remaining members of staff could work and see whether the tasks can be shared out to avoid employing someone new. You may be able to replace a full-time person with a part-timer to save money.
2. Outsource administrative tasks – if your workload dictates that you need to replace staff, an in-house employee isn’t the only option. There are a number of outsource companies, many using ingenious tech, that specialise in lettings and property management, allowing agents to delegate a whole role or a menu of specific tasks.
Agents can outsource tenancy administration, rent collection and full property management – or all three. The money-saving aspect comes from only paying for the services required on a property-by-property basis, rather than hiring a full-time employee.
3. Don’t let viewings be a drain on resources - Many agents have to open their branch and/or employ staff to work weekends just for viewings, and while this is great for tenants, it isn’t a revenue-generating activity. Viewber offers a financially smarter way to manage viewings as it operates on a ‘pay-per-viewing’ basis and encourages efficient open house usage. No viewings booked for Sunday? There’s nothing to pay and you could save the wages of weekend viewings assistant who may be sat twiddling their thumbs.
At the other end of the scale, Viewbers can take on viewings and property visits during your busiest periods. Two hours of a Viewber’s time will cost significantly less than two hours of your Senior Negotiator time, who could be singing up a landlord on a full management package rather than opening up for an inventory clerk.
4. Maximise referral fees - If you have been following industry news, you’ll be aware that agents have to be more transparent when it comes to referral fees but the guidance stops short of an outright ban. As long as you’re implicitly clear to tenants and landlords that your agency will financially gain for referring products and services, you can continue to recommend solicitors and mortgage advisers. So how about exploring a new avenue? There are referral fees attached to utility comparison and switching services too.
5. Revisit rent strategies - Although this comes at a controversial stage, many letting agents overlook the importance of revisiting rents and suggesting rises to landlords. It needs to be sensitively handled, in line with local market values and reflective of tenant demand, but raising rents helps landlords who are feeling the pinch and increases property management fees.
6. Swapping High Street branches for a hybrid operation - Another significant overhead is High Street branches, with rents and business rates often crippling, especially during leaner times. Agents can pursue the hybrid route, where they keep a few central offices - perhaps just off the high street or in a smart serviced office – which can cut overheads. Or there’s the option of drastically culling a High Street presence altogether to move operations entirely online. Luckily, lettings lends itself to locations away from prime spots, so there are numerous money-saving options to explore, often bolstered with some clever tech.
To see how we can help you thrive in the wake of the tenant fee ban, and to learn more about Viewber’s accompanied viewings and property visiting service, contact us today.
* Generation Rent