Letting Agency Fees in London: 2020
Selecting the right lettings service to market your property is a daunting task, particularly if you are a first-time landlord. It comes as no surprise that, in an industry notorious for its lack of transparency, very few agents signpost their fees front and centre on their homepage. Even when you have managed to track down a schedule of fees, the creative language used to describe services makes it hard to understand what exactly is included at each level and what will incur additional charges.
To help you cut through the noise and understand how much you are likely to be charged for various lettings services, we have put together this guide for landlords looking to rent out property in London. We have compared the fees of the biggest national chains and several well-established local agencies operating in the city to find out the average cost of letting a property through an agent.
We have focused on two different service levels: tenant find and fully managed. For the purposes of this guide, we have not included a comparison of the many online marketing platforms available on the market. This is because these are DIY platforms that provide inexpensive access to key marketing portals but no further administrative or compliance services. The services we have compared are pitching an end-to-end service for landlords who wish to remain more hands off in the marketing and management of their portfolio.
We reviewed 10 national corporate chains (the agents with the largest share of the London market) and 10 independently owned local agents with a strong presence in their respective areas. This is because they provide broadly similar services but local agents have traditionally offered landlords lower fees than their corporate competitors.
We have also taken a deep dive into the additional fees agents charge for various administrative processes and tenancy renewals. Many of the services a landlord might reasonably assume to be included in a tenant find package often come at an extra charge and costs can quickly add up.
Tenant Find Services
Landlords with the inclination, resources, and capacity (i.e they live close enough to the rental property to manage any issues that arise) normally opt for a tenant find service. This is the basic service level offered by most agents and involves marketing the property and securing a tenancy but nothing further after the renters have moved in. Here is the average cost for these services with national and local agencies. All prices are inclusive of VAT unless stated otherwise and represent a percentage of the total annual rent.
Average price: 13.02%
Sample range: 10.8% to 15%
Mean price: 13.2% (half of the agents reviewed charge this rate)
Average price: 12.17%
Sample range: 9.6% to 14.4%
Mean price: 12%/13.2% (roughly a third of local agents sampled were charging 12% and the same number were charging 13.2%)
Let’s break down what both average fees would look like in nominal terms using a property let at £1,750pcm as an example.
1,750 x 12 = 21,000
(21,000/100) x 13.02 = £2,734.20
(21,000/100) x 12.17 = £2,555.70
The average pricing for 2020 represents a significant markup compared to the fees we observed during a similar exercise in 2019. Following the Tenant Fee Act, which prohibits agents from charging fees to renters for the overwhelming majority of their services, many agents who relied on tenant fees to generate a substantial proportion of their revenue have had to burden landlords with higher fees to cover the shortfall. It’s worth bearing in mind that many agencies were previously double charging both tenants and landlords for the same services - that increase you might be seeing on your invoice is likely the tenant’s contribution to services you had supposedly paid for.
As a landlord, you might reasonably assume that the fee for something marketed as a ‘tenant find’ or ‘lettings service’ includes all the necessary marketing, contracting, and administration required to secure a tenancy. However, the overwhelming majority of the agents we reviewed did not include essential tenancy administration in their tenant find service. Many charged additional fees for items such as contracts and referencing (which we will explore in more detail below).
It is therefore essential to interrogate the list of services included for the tenant find fee and read the small print to know what you are really getting for your money. In the most egregious examples we found, many of the services included within the tenant find rate appear highly suspect under scrutiny. We found the following ‘services’ promoted by various agents as ‘perks’ included within their standard tenant find fee:
- ‘Advising on preparing your property for let.’
- ‘Put up a To Let board.’
- ‘Deduct any pre-tenancy invoices.’
- ‘Provide tenants with a method of payment.’
Landlords should question the value that is actually added by every service listed in the tenant find package to justify the substantial fee. Is it not a given that the agent will provide the tenant with bank details in which to pay move-in funds and deduct money for invoices of services rendered? Advisory services are often ill-defined, so be sure to quiz any agent on what is provided before you consider signing on.
Additionally, an industry insider tip that agents don’t want you to know is that ‘To Let’ boards are not particularly effective acquisition tools for finding renters (who conduct their property search almost entirely online). They are, however, good advertising for the agent with local landlords. Review the services that are included and think carefully about whether they are all legitimately useful, or whether they are listed to pad out a justification for a fee that does not include essential tenancy administration.
Always be aware that just because an agent has branded something as a ‘lettings service’, it doesn’t mean that contracting and tenancy progression is included. That 13.2% or 12% could well just be the fees for marketing the property - you may need to pay significantly more to secure the tenancy.
Property Management Services
Landlords who either do not live locally to their rental property or do not have the time or desire to deal with that hassle that arises from managing a tenancy can opt to instruct an agent to manage the property. Many agents offer a variety of management services, from rent collection only through to premium management packages that include added perks such as interior design consultation.
The prices below are for a standard management package that deals with things like rent collection and arrears chasing, responding to tenant queries, emergency response, maintenance works, and property inspections, but not certain additional premium services offered by boutique or high-end agents.
Average price: 19.32%
Range: 14.4% to 20.4%
Mean: 20.4% (more than half of the agents reviewed charged this rate)
Average price: 17.82%
Range: 15% to 20.4%
Mean: 16.8% (roughly a third of agents reviewed charged this rate)
In nominal terms
1,750 x 12 = 21,000
(21,000/100) x 19.32 = £4,057.20
(21,000/100) x 17.82 = £3,742.20
The same caveats apply as above with the tenant find fees. Management fees also won’t include the cost of essential administration, such as the tenancy agreement or tenant referencing. It also won’t cover the cost of any administration that may arise during property management during the tenancy - e.g. the service of notices to regain vacant possession.
Renewals and Additional Fees
As we have already discussed, most agents charge a range of additional fees on top of the various service levels they offer. Many of these additional fees are for administration that is essential to the progression of a tenancy and are quite often helpfully euphemised as ‘non-optional fees’ in pricing documents. Most agents also charge substantial fees if a tenancy is renewed at the end of the initial fixed term and this is not always transparent from the outset.
It is difficult to do a like-for-like comparison between agents or define an overall average when it comes to administration fees and renewals. With fees, some agents will charge a ‘tenancy set-up’ fee that includes key services such as contracting, Right to Rent, and tenant referencing, whereas others will charge separately for each item. When it comes to renewals many agents charge a percentage of the annual rent as they would with the initial tenant-find/management service and others will charge a one-off fixed fee. Instead of providing an average price, we have opted instead to explore the various figures we came across during our research to give you an idea of what to expect.
We have defined administration fees as any work crucial to tenancy progression that is carried out directly by the agent. We have not taken into consideration charges for services such as compliance documentation and inventory inspections, as these require third party specialists for completion and are often won’t need to be commissioned before the start of every tenancy (e.g an EPC is valid for 10 years).
Across all the agents, national and local, that we reviewed for this article, the range of fees for the drawing up of the tenancy agreement was roughly between £150 to £300.
The standard price for tenant referencing across the industry is £72 (£60 plus VAT), with very little variation (with only one national agent charging less than this at £45 per tenant). The most absurd fee we found was a £162 charge for referencing tenant guarantors. There is little meaningful difference between the process of referencing a tenant (for which the same agent charges £72 per tenant), so it is entirely unclear what accounts for the discrepancy in pricing.
The precise package of services offered by difference agents varies, but typically when you see a tenancy set-up fee this will include contracting, Right to Rent checks, and tenant referencing at a minimum (some, but by no means all, include deposit registration).
Prices for this service ranged roughly between £120 and £450.
Many agents break their tenancy progression processes down into granular detail and charge for each element. For example, some agents were charging £30 per tenant to complete Right to Rent checks (in which the tenant visits their office with a passport or other supporting documentation and an agent takes a photocopy). Many also charge a fee of £60+ if you wish for them to register the deposit with one of the government-backed protection schemes and then a further fee if they need to do any negotiation with the tenant over deductions.
Landlords also need to be on the lookout for particularly pernicious fees hidden in the small print. For example, two of the agents we reviewed contractually bound landlords to charges of 1.2% and 2.4% in commission if they sell the property to the tenants. It is outrageous that any agent instructed to find a tenant would feel entitled to commission for an entirely separate sales service for which they have performed no work.
When it comes to renewals agents will charge either a fixed fee or a percentage commission. This is where we observed the most divergence between national and local agents, with nationals charging considerably more. Prices also vary significantly between agents within each category.
Among the nationals, fees ranged between 9% to 13.2% where a commission is charged. One agent charging 13.2% deducts the same commission for a renewal as they do for tenant find services, despite not having done any work to advertise the property, conduct viewings, and find new tenants.
Those charging a fixed fee offer more competitive rates - with prices ranging from £180 to £300.
While it is not inherently unreasonable to charge renewal fees for the administrative work required, commission that is near or identical to the original fee is impossible to justify. Of those agents charging a percentage fee, all charged more than 50% of the original tenant find fee despite providing none of the tenant find marketing services.
The Home Made alternative
At Home Made, we offer a hybrid lettings solution providing the end-to-end services of a traditional agent at a much lower cost (and substantially higher quality).
Our fees are as follows:
Tenant find: £948 plus VAT (£1,137.60) or 3% plus VAT (3.6%) on properties where the monthly rent exceeds £3000.
Fully managed: 4% plus VAT (4.8%) in addition to the tenant find fee.
Renewals: No fee.
The cost of our tenant find and fully managed services are inclusive of the following:
- Property marketing across all major listings portals and additional unique channels.
- Accompanied viewings.
- Access to our proprietary online landlord platform.
- Offer handling and negotiation.
- Tenant referencing.
- Deposit registration and administration.
- Right to Rent checks (and follow up checks where a tenant with time-limited status renews a tenancy).
- Guidance on all of your compliance obligations.
- End-of-tenancy termination and renewals.
- Renewal negotiation and documentation free of charge.
Additional fees are only required if you would like us to arrange pre-tenancy compliance services or an inventory on your behalf through one of our specialist third-party contractors and these are entirely optional (though the compliance obligations these inspections are necessary to meet are not).
We keep our costs low through a combination of our efficient centralised operation, smart technology, and our commitment to charging fair and transparent fees. We cover the whole of London from one office in Waterloo, so the money you pay us covers the services you have received - not the rent bill for a network of agency branches that neither you nor many renters ever set foot in. We firmly believe that renting and letting property doesn’t need to be painful or expensive, and we will never charge you every time we make a copy of a document just because we can.