The draft Tenant Fees Bill will see letting fees for tenants being banned in the UK, but some expect the quality of service from agents to go down with their profits. Could landlords be better off self-managing their rentals?

Last year, the number of landlords who use a letting agent to manage their property or properties increased to around 61%, according to a study by the National Landlords Association (NLA), compared to the 54% seen in 2016. But with the Bill making progress in Parliament towards banning certain fees charged by letting agents – including for reference checks, inventories and administration fees – many believe this trend could be set to change.

As the letting agents would have to foot the bill for these processes once the tenant is no longer obliged to pay, it is possible that many will pass on the added expense to landlords, who in turn might hike their rents to recoup the costs – meaning the tenants end up paying more anyway.

Residential Landlords Association (RLA) policy director David Smith said: “I have agents who get 5% of their turnover out of fees. I have agent clients who get 30% of their turnover from fees. If you take 30% of your turnover from fees then you have got two choices, and one of them is going out of business so that is probably not a realistic choice.

“So the money has got to come from somewhere and it will come from landlords or it will come from loopholing in the Bill, or it will come from both in reality because it is almost impossible to write a piece of legislation that doesn’t have a loophole in it,” he added.

The switch to self-management

The prospect of landlords self-managing their properties and avoiding paying higher rates to letting agents could become a more attractive prospect for those who are able to do so, and could benefit tenants, too, say some commentators.

Dan Wilson Craw, interim director at Generation Rent, said to the Communities and Local Government Committee: “The English Housing Survey looked at satisfaction rates for tenants who had paid a fee at the start of the tenancy and those who hadn’t.

“We might assume that those who hadn’t paid a fee aren’t renting through a letting agent, and they were more satisfied with their tenancy by about eight percentage points.

“I am not sure that is something we can apply to the post-fee world but it suggests that there isn’t a huge difference in quality between self-managed properties and agent-managed properties. If anything, landlords who manage properties directly do a better job.”

It is obviously vital that landlords who choose to manage their own properties are completely up-to-date on the latest regulations and legislation – and some landlords simply will not be able to keep up with the management without using an agent, such as those with multiple properties and those who live too far away to provide an adequate service.

John Stewart, policy manager at the RLA, said: “Self-managing a property can be a very positive experience, allowing landlords to build relationships with their own tenants and service providers.

“It enables landlords to retain full control over all major decisions from referencing to cost of maintenance, as well as saving money on agents’ fees. However, landlords will need to spend time on keeping up-to-date with national and local legislation and take full responsibility for getting things right.”