December 23

Is a buy-to-let landlord disadvantaged by letting agent renewal fees?

Buy to Let Landlord? Free your time and save money with full-service property management

One of the constant gripes we hear from buy-to-let landlords is the extortionate fees charged when a tenant renews their lease. The big gripe about renewal fees is where they are charged by high street letting agents that find tenants and provide no other property management services.
Here, I look at whether you can avoid paying these fees and just how much expensive they can be. I’ll also compare these charges to the service and charge made by Ezytrac. buy-to-let landlords will find there’s a world of difference.

What are letting agent renewal fees?

A lot of DIY landlords use letting agents to find their tenants. It can make a lot of sense – a letting agent has experience in the business of finding tenants. They are used to conducting the referencing, credit checks, and speaking to current and previous employers and landlords.
The property investor may have been burned by a tenant before – a seemingly good tenant turned out to be a tenant from hell. Using a letting agent should help to protect against this (though tenants can still go bad). Plus, the letting agent already has marketing routes in place, including local press and online portals.
The fee they charge buy-to-let landlords for the work the letting agent does vary widely. For example, Savills charges 15% to find a tenant and conduct viewings, though they will also provide the tenant with a payment method and operate a rental arrears process.
Foxtons – an agency that was embroiled in (and lost) a case about unfair renewal fees in 2009 – charges 13.2% for its lettings only service, with a renewal fee of 10.8% for the first two years.
The kick in the proverbials for the buy-to-let landlord is that the renewal fee is charged despite little or no extra work being required. The tenant is already in place. If you’re a DIY landlord, you’ll still have to do all the routine maintenance as and when it is required. You’ll still have to chase payments, field tenant calls at all hours, and organise emergency repairs.

Why do letting agents charge renewal fees?

Renewal fees are a convention within the industry. They’ve always been charged. The letting agent considers your tenant as their client – if it weren’t for the agent, you wouldn’t have the tenant. Often, buy-to-let landlords are only aware they’re going to be charged a renewal fee when they receive the invoice.
The letting agent sees the renewal fee as an ongoing commission. You might see it as a rip-off.

What can you do about your letting agent’s renewal fee?

While you might think that there is no work for the agent when renewing a tenancy agreement, any changes in the law or new or updated rules and regulations have to be included. In other words, it’s perfectly reasonable to expect to pay something upon renewal. What buy-to-let landlords shouldn’t expect to be hit with is a massive bill that will take a huge bite out of your rental income. And don’t forget, you’ve still got all the day-to-day landlord routine to deal with.
I’ve heard of buy-to-let landlords who have tried to avoid their renewal fee by claiming the property had been sold or tried to do a secret deal with the tenant and sack the agent. Neither strategy works. You’ll be found out, and probably taken to court.
Other buy-to-let landlords have refused to renew the tenancy, forcing a good tenant to move on. They’ve then sacked the agent, and either searched for a tenant themselves or hired a new letting agent. These landlords usually end up with a bad tenant or a bigger fee to pay.

What can you do about extortionate renewal fees?

There are a few things that you can do to reduce renewal fees to more manageable levels.

  1. The first of these is to make sure that your agreement with the agent is checked over by a solicitor. You’ll often find that the renewal fees are tucked away in a clause towards the end of the contract.
  2. Having checked out the buy-to-let landlords contract, renegotiate the renewal fee. Until you sign that contract, you’ll find that the letting agent can be very amenable. Don’t expect to get the renewal fee deleted, but there’s every chance that you could get it reduced. The agent wants your business.
  3. Make sure that your agent works for the renewal fee. Have them negotiate a rental increase – this will at least help towards the fee.

How to slash your buy-to-let landlord fees

Buy-to-let landlords might decide to take advantage of a fully managed property service instead of being a DIY landlord using a letting agent to find tenants. Any tenant stress you currently suffer will disappear, and the cost can be offset against your rental income profits. You’ll benefit from the same tenant finding and vetting processes, but get extra value for your money.
The problem is that the letting agents that charge such high fees for tenant finding and tenancy agreement renewals typically charge the earth for a fully managed service. It’s often not their main business, and so is something of an expensive inconvenience for them. If you’re using a letting agent whose main business is estate agency, the chances are that your property management fees are way higher than they could be.
Instead of using an estate agent come letting agent come property manager, use a specialist property management company – and when selecting which to hire, ensure that they offer the services you need.

Tenant find from just £200

Forget paying 15% or more to find excellent tenants. Our tenant finding service starts at just £200 to £450 for buy-to-let investment properties outside of London. Even in London, you’ll find our 5% fee to be a market leader. For these highly competitive fees you receive highly targeted services, which include:

  • Property marketing and regular updates
  • Immediate relay of any offers made
  • Tenant credit and reference checking
  • Draft tenancy agreement
  • Deposit prescribed information
  • Deposit registered with DPS
  • Initial month’s rent collected and remitted
  • Provide the tenant with a payment method
  • Deduction of pre-tenancy invoices
  • Itemised statement of accounts
  • Set up of rent guarantee insurance (if required)

A fully managed property service at 10% or less

At less than half some of the renewal fees I’ve seen, you could benefit from Ezytrac’s fully managed service. It does move you into effortless property management. Our charges for a fully managed service is at 7.5% in London, and 10% outside of London (subject to location). You can sit back and relax while our specialist team take care of the day-to-day landlord tasks associated with your property investment.
This service includes:

  • Collecting and remitting monthly rent (rent transferred within 24 hours once deposited in our account)
  • An itemised statement of account
  • Chase up non-payers and any rent arrears
  • We deduct commission and other works at source for ease of accounting
  • Advise utility providers of any changes
  • Arrange repairs and maintenance using approved contractors
  • Key holding
  • Annual rent reviews conducted
  • Organise ground rents for payment
  • Ensure that you comply with all your legal obligations
  • Submit non-residents landlord receipts to HMRC (where required)
  • Deal with any and all breaches in terms of the tenancy
  • Provide access to legal and evictions specialists
  • Organise tenant check-outs and deal with discrepancies
  • Conduct full inventory reports and regular property inspections
  • Provide annual itemised statements of accounts for tax purposes

If you’re still doing it yourself and paying renewal fees to letting agents, it’s time to review your property investment objectives?
Did you plan to be a full-time buy-to-let landlord, or did you hope your property investment would free your time while paying you valuable income?
Want to spend more time with your family and friends, doing the things you love doing?
Contact one of the Ezytrac team today or me on +44  1522  503  717, and discover how our Set and Forget philosophy could transform your buy-to-let property investment, save you money, and free your time.
Charlotte Jones


buy-to-let landlord, renewal fees

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