We are at the beginning of the end for let only tenancies according to a leading property management company. Apropos by DJ Alexander believes that let only tenancies have historically been subsidised by tenants’ fees and since their ban in June agents will now increase charges to landlords to cover their lost revenue.
David Alexander, joint managing partner of Apropos by DJ Alexander, commented: “The fact that agents, prior to the tenants fee ban, were able to offer a reduced rate for this service was because they were subsidizing their income with tenants’ fees. Now this income source has gone, agents will no longer be able to offer such low charges so it is inevitable that they will be putting up these fees. Some agents may take longer to appreciate this shift, but all will have to change unless they want to run their business at a loss.”
“There is growing evidence that many agents are already experiencing a substantial loss of income following the introduction of the Tenants Fees Act in June. A recent survey reported that many agents are facing a gap of between 10-25% of income and they must adapt to the new way of working or find their business failing.”
David continued: “What is interesting is that Scotland, which has already been through changes similar to the Tenants Fees Bill, has already extended tenants’ rights, and introduced a code of conduct in 2017 which is also now being proposed for England, now appears to have a more financially stable property management sector following these developments. Despite the gloom and doom predictions of naysayers prior to the implementation of these changes the market adapted and has thrived, and the best agents have developed their business model to make it stronger.”
“Interestingly, the number of companies entering formal insolvency procedures involved in real estate activities in Scotland fell in 2018 to its lowest figure since 2007 with just 17 companies going bust during the whole year. By contrast the number of real estate companies failing in England and Wales reached its highest level in four years in Q1 2019 with a total of 121 and the year as a whole looks likely to be similar to the previous peak which occurred during 2014 when 522 companies entered insolvency.”
David concluded: “Let only tenancies are on the way out as landlords who favoured these are increasingly leaving the market due to the regulatory and financial changes introduced by the government. Agents which increase charges for a let only service will only exacerbate the financial issues these landlords are already facing. Change is inevitable in all markets and the companies that adapt to the new business environment will survive while those who bemoan the passing of previous systems will perish.”