Letting agents help to let out the properties that landlords have because they are able to access a greater number of potential tenants and they are specialists in this area of the property. As a result, they charge a landlord a fee. This article goes over how these fees work so you can position yourself best as a landlord and know how to interact with a letting agent.
From how much the fees are that a letting agent should charge to the different types of services a letting agent can charge for. This article will go into detail about how these agencies make their money.
Looking for reasonable letting agent fees?
We partner with Cozee, our letting agent partners who are able to reference tenants in just 24 – 48 hours and charge just 6% as a letting fee
What are the three different types of letting agents fees?
Letting agent fees are usually charged in three different ways, a let only service, a rent collection service and a full property management service. Some letting agents will do all three and other will outsource some parts of the role to a property manager who will deal with more complicated issues.
1.) What is a let only service?
Let only services are charged as a commission of the rent (Typically 3% – 6%) for the first month most of the time after the letting agent is able to find a landlord a suitable tenant for their property.
They may be able to find tenant through marketing themself as a letting agent in the area to appeal to tenants or they may use secondary platforms to find tenants and landlords and be the person in the middle of the deal too.
How many months rent does a let only service charge for?
A let only service is where an agent will charge a landlord strictly for finding a tenant and the agent will take a fee from the landlord, from the rent, usually for the first two to four weeks of rent.
2.) What is a rent collection service?
Instead of a landlord having to collect rent and deal with a tenancy themself, a letting agent could do this on behalf of the landlord and charge a letting agent rent collection fee.
On top of letting the property, the letting agent would also chase any rent arrears and simplify the process of rent collection for landlords.
This would make sure that the rent is always paid on time and it means the landlord doesn’t have to deal with any rent arrears. This usually comes with an extra 1% – 2% in the agent’s property management fee.
In addition, in some places in the UK, rent collection is still done manually as the landlord collects cheques.
3. What is a full property management service?
Full management fees are for letting agents who also offer services typical for residential property managers. This means the management of tenants and the maintenance of a property. However, instead of calling himself a property management company, they may still be called a letting agency with full management.
The extra fees for this type of charge include making sure that professionals are hired to maintain the safety of a property. This includes electrical safety, gas safety and also making sure there is always a valid energy performance certificate in the property.
Finally, any issues to do with tenants including damage to the property and any issues to do with their tenancy such as them wanting to end the tenancy by handing in a notice to quit or issuing eviction notices on behalf of the landlord.
This is useful because often landlords who have multiple properties or have other forms of employment simply do not have the time to deal with everyday issues that happen in a property and need someone to manage this for them.
If a letting agent manages multiple properties – including properties from multiple landlords, they can easily and seamlessly manage tenants as this is what they’re used to
For example, a landlord who has two properties that produce an income of £5,000 profit through their property business and has a full time job on the side may find it useful to pay a letting agent 10% with full management fees a percentage of the rent and take home £4,500 instead as an example.
This £500 will be paid to the letting agent to manage the property and deal with the tenant and the letting agent will be dealing with other properties and also collecting other £500 commissions as they manage properties from multiple different individuals.
Cozee – our partner letting agents pricing
|Letting & Management (Core Service)||8%|
|Let Only (Core Service)||6%|
|Onboarding Fee (Includes pre-letting inspection, portal setup, and initial regulation checks)||£150|
|Cancellation of Let Before Tenant Move-In (Includes costs incurred by third parties such as references and inventory)||£200|
|Tenancy Agreement Fee||£100|
|Reference Fees per Person||£20|
|Land Registry & Head Lease from Land Registry||£10|
|Deposit Registration (Per Tenancy)||£30|
|Change of Ownership Setup||£200|
|Selective Licence Application (Excluding council costs)||£300|
|Mandatory & Additional HMO Licence Application (Excluding council costs)||£600|
|Annual License Holding (Per Year)||£100|
|HMO Visits and Additional Property Visits||£60|
|Quarterly Return to HMRC||£100|
|Section 13 Notice (Solicitor’s fees may apply)||£50|
|Section 21 Notice (Solicitor’s fees may apply)||£50|
|Energy Performance Certificate (EPC)||£125|
|Gas Safety Record Fee||£110|
|Portable Electrical Inspection Fee||Quote|
|Legionella Risk Assessment Fee (if applicable)||Quote|
|Installation of Smoke and CO Alarms||£50|
|Electrical Installation Condition Report (EICR)||From £180|
|Payments (Service Charge, Utilities)||£15|
|Mail Forwarding and Scanning (Per Month)||£20|
Is Cozee registered and do letting agents need to be?
There are a few registered bodies that a letting agent needs to be signed up to in order to become a functioning letting agency.
These include :
- The financial Ombusman
- Money and data Protection Scheme
- Tenancy deposit scheme
- Money Shield
How much do letting agents charge on average?
Typically, this is how fees may be broken down for a letting agent who charges different types of fees However, you should also consider that there are letting agents that are based at a local level or a national level. There are holiday letting agents too that may work on an international level.
|Rent (£)||Let Only Service (6%)||Rent Collection Service (7%)||Full Property Management Service (8%)|
Should you get an agents that is based locally?
Some people prefer a local agent. They may have a physical location for their business or they may be based online but be able to meet in person whenever they are conducting viewings.
Typically, these types of agents offer a more personalised service and techy have local knowledge of the area with very little upfront costs.
Viewings are almost always done for free too as there is little effort needed to visit the property as they are based locally and the letting agent will likely be incentivised by a commission by letting the property.
Should you get an agent that is based nationally?
National estate agents usually have a large customer base with fewer people on the ground. Viewings may have to be done by the landlord or someone working on behalf of the landlord.
Platforms you may have heard of include Zoopla or Sparoom.
How much do holiday letting agents charge?
Holiday letting agents work in the same way as traditional agents. The difference is they work with property that is designed to be let out to tenants for a shorter period of time (usually days to weeks) and they charge a higher commission as a result.
Their service is usually more niche and they will charge around 20% of the booking cost of the hotel or the accommodation that the agent is working for.
How can you reduce letting agents fees?
Reducing letting agent fees can be done in a few ways. One of the easiest is to just do all the letting of the property yourself or dramatically reduce the cost of having a letting agent by using a letting agent that is based online such as spareroom.
How can you begin with DIY lettings and management?
In order to begin with DIY lettings and management, you can begin by listing your property for rent on platforms that charge a small fee to list such as on spareroom.
If not, you can also get creative with your methods of finding tenants such as looking on social media, finding the right type of property
It is also important to bear in mind that you will have to manage a fair amount yourself and also learn a lot. This includes communicating well, recording maintenance and tenancies well and remaining organised throughout.
How can you find the right letting agents in your area to reduce fees?
In order to find the right letting agents in your area and find the fees that are the most affordable or the deals that present the best value for money, begin your search online and see if you can find any recommendations from in person too.
Some other common places to begin asking are other landlords who have property and have been successful with moving tenants into their property.
Or, speaking to people like mortgage advisors or estate agents may be a good idea as they often work with letting agent partners to assist those who are in the property space who will likely need the service.
How can you look for the right traits that make a good letting agent?
The services that a letting agent provides varies as mentioned. But there are still some general things that make a good letting agent that you should look out for on your search to be happy with the fee you’re being charged. These include:
- They regularly check in on property
- Having reviews from other happy tenants and landlords
- They have the legal qualifications to have a letting agency
- They communicate well with you and tenants
How can you use online letting agents?
Online letting agents are almost always cheaper than traditional letting agents because they can afford to charge less for a tenant because they have few overheads.
Having said this, online letting agents usually only have a let only service (arranging for tenants to live in your property) rather than have a full property management service.
Nonetheless, you can certainly save some money on fees by using an online letting agent like Rightmove and then taking over the management of the tenant yourself later on.
How can you reduce the amount of letting agent fees you have to pay?
To reduce letting agent fees, shop around to find different letting agents or speak to your agent about the level of service you want. You may be able to remove your management fee for instance and be charged a smaller commission
How do I find the right letting agent with the right fees?
In order to find the right letting agent with the right fees, consider what the letting agent offers and if their services are everything you want to be covered as a landlord. There is a good chance you will be able to negotiate and come to a good deal on fees charged if you explain your situation carefully to a letting agent.