Is Your Letting Agency Ready for the Tenant Fees Ban?
We’ve heard the protests, the lobbying and the arguments why a ban is unfair, but this is a battle that letting agents won’t win. If you’re burying your head in the sand or hoping for a change of heart from Whitehall, we’d like to suggest you take a bit of constructive action instead.
If you’re currently charging fees to tenants, it’s possible that your existing business model will become unsustainable in the very near future. Even if you’re not sure where to start, start preparing right now. There is a lot you can do. Some of the ideas that follow may not work for your business, but at this stage, we suggest that everything should be on the table for debate and discussion.
Where to begin
Firstly, make sure you understand exactly what is covered by the ban. Make sure you’re aware of the penalties too because they’re serious. The legislation is still making its way through Parliament and it is being amended, but make sure you stay up-to-speed. Agents in Wales will need to watch closely as their own rules pass into law.
A sure way to inject a bit of pace in your fees ban planning is to work out what would happen if you changed nothing else but lost all your income from fees.
Once you know what you’re up against, it’s time to examine your business model. Where does your income come from and what will the ban do to your revenue? What are your outgoings, fixed and variable? Which market are you serving? How strong is your brand, image and reputation? Do you retain landlords? Is your business healthy and growing? Who are your competitors? What are your ambitions? You’ll think of many more questions, but when you’re involved in the day-to-day process of running a business, the bigger picture can be forgotten. Now you really need to know what that picture looks like.
Developing a new business model
We don’t want to be too obvious, but if you’ve been reliant on fees you will need a new business model. The following ideas may help you to develop it.
- Make more use of technology.
Increasing your efficiency by embracing technology will save money and help you to offer a better service to your landlords and to potential tenants. If you can find software that’s easy to integrate, go for it. Switching between systems is a hassle no business needs.
- Look for alternative income streams
The tenants you serve are going through a relocation process. The list of things they will need is massive. You can earn income by referring them to utilities suppliers or insurers. Don’t dismiss referral fees as irrelevant. Rates vary but can be very generous, and some of our own letting agents earn substantial commissions.
- Streamline your business
If there’s waste or inefficiency, cut it out. Don’t be sentimental – ask the tough questions. Is everyone on the team pulling their weight? Do you need your high street location? Can you secure a better deal on your rent, your vehicles or your utility bills?
- Think about commercial partnerships
Are there businesses whose products or services align with your tenants or landlords needs. What about forming partnerships with maintenance, gardening or removals service providers?
- Can you outsource some functions?
Maybe you’ve got in-house payroll, IT or accounting staff. Can you get the services you need without the costs of employment?
- Improve what you offer to landlords
The letting agency business will be going through a big shake-up. Attracting new landlords and retaining them will be key to survival. Can you offer more support, better management or better rates? Can you improve the way you present your landlord’s properties?
- Improve what you offer to tenants
Can you open on Sundays or offer more flexible arrangements to view properties, for example. Your reputation depends on good feedback from all your clients – even those who aren’t going to be paying you.
- Think about expansion
Some letting agents will quit the business. Others may be looking to merge for economies of scale. Look for the opportunities to build a different but perhaps stronger agency.
And finally …
Can you use the fees ban to your advantage? Could you get good publicity and gain business by implementing the change before it comes into force?
This will be a big change. There’s no doubt about it, but it could be the impetus that starts you on the road to great things. Don’t be afraid of it. Get excited about the possibilities.
If you’d like to learn more about our referral commissions, just call us on 0344 567 4001