Plumbing And Property Maintenance Limited

Landlords

Are you a landlord that relies upon their Letting Agents to organise repairs and maintenance on their property?

If YES, do you know whether they are collecting 'secret profits' from organising the repairs for you, on top of your monthly fees? The majority of Letting Agents these days expect contractors to add a percentage to their repair invoices. This charge is not shown separately on the invoice and you, the landlord, has the full invoice amount deducted from your rental income. The Letting Agent will then pay the contractor a reduced amount and pocket their commission. The landlord quite often is not even aware that this is happening.

Take a look at this article from The Telegraph...

 

Landlords hit with hidden fees and commissions

Estate agents are taking a huge cut for arranging work through contractors and are not disclosing it to landlords.

7:15AM GMT 07 Feb 2014

Landlords are being stung with hidden charges and inflated costs by estate agents that arrange property servicing and maintenance work through contractors, according to industry insiders.

Buy-to-let investors who use an estate agent to manage their properties typically pay a monthly fee of around 15% of their rental income. This buys a service which includes finding tenants, drawing up rental agreements and maintaining the property.

However on top of this charge, estate agents are adding markups of up to 20% to contractors’ bills to boost their profits, plus demanding a cut of up to 60% from contractors for the work they do. These charges are not clearly disclosed to landlords, who ultimately foot the bill.

 

The Happy Tenant Company, a property management service, said agents routinely add a markup to contractors’ bills before invoicing landlords. A recent mystery shopping exercise revealed estate agents were charging landlords six times the cost price for basic services such as gas safety checks, tenant referencing and deposit protection.

Jonathan Monjack, a lawyer and chief executive of The Happy Tenant Company, said the more serious problem is that agents also take a “secret commission” from the contractor.

He said some agents are more focused on finding contractors that will agree to high commissions – up to 60% in some cases – in exchange for large volumes of work, than finding quality tradespeople for landlords.

“We have seen cases where a contractor provided a service for £100 and the agent billed the landlord for £120 and took a 60% cut from the contractor. Essentially the agent received £80 for arranging a job that cost £100. This type of practice drives up contractors’ prices, and landlords are forced to foot the bill.”

Will Davies, who heads property maintenance and refurbishment company aspect.co.uk, said the practice is standard across the industry but said some agents are especially aggressive when demanding commissions for maintenance work they booked on behalf of landlords.

“We stopped working with one very well-known lettings agency when they wanted to increase their commission from 15% to 20%,” Mr Davies said.

“Landlords pay their monthly fee and they expect their agent to find contractors with their best interests in mind. In reality agents are not concerned about quality, they will sign up the contractor who will pay the best commission.”

Mr Monjack said the fact that agents do not notify landlords that they are taking these commissions is “questionably fraudulent”. He said agents should have a duty to act in the best interest of landlords. Featherstone Leigh, an estate agent in south-west London, is one of the agents that have spoken out against hidden commissions.

Joanna Hamilton, a director at the firm, said it is time that the payments – which have historically been seen as a “nice little earner” for the industry – are wiped out.

The Trading Standards Institute said it is aware of the allegations, but it has not seen any “hard, written evidence” that commissions are passing from contractors to agents. A spokesman said the institute is not aware of any convictions or prosecutions within trading standards.

However, it urged landlords to complain to The Property Ombudsman if they think their estate agent is taking kickbacks.

Estate agents are not regulated but the Government is looking at introducing compulsory regulation. Until then, look for an agent that is a member of a professional body such as the National Approved Letting Scheme, Residential Landlords Association, UK Association of Letting Agents or the Royal Institution of Chartered Surveyors.

These bodies operate a code of conduct that requires members to meet customer service standards, but be aware that membership does not guarantee agents do not add additional charges or take commissions from contractors.

Before employing an agent, ask for a full list of fees and a detailed explanation of what these cover. Also ask whether the agent takes any fees or commissions from contractors. It is worth requesting that the agent includes a line in its contract guaranteeing it will disclose all charges and commissions.

Ask to see original invoices from contractors after any work is done. Make sure there is a breakdown of the total cost. The typical price of standard maintenance work such as gas safety checks is readily available online for comparison. Alternatively call a local trade company if you want to check a price.

If you have a local tradesperson that you trust, insist the agent uses them for any work that’s required. They are less likely to be pressured into commission agreements than contractors who carry out regular work for an agent.

If you think you’ve been overcharged, complain to your agent and ask to see an explanation of all costs. If you are not satisfied with the response, refer your complaint to The Property Ombudsman. The ombudsman provides a free and independent dispute resolution service – but the agent has to be a signatory to the scheme. Christopher Hamer, the ombudsman, can award financial compensation.

Mr Hamer said: “While there’s nothing illegal about a letting agent receiving a commission or referral fee for arranging contractor work at a property, you have to ask if it is fair for an agent to charge the landlord a premium on top of the actual cost for contractor work when the landlord is already paying a management fee to the agent.

“TPO’s Lettings Code of Practice clearly states that there must be complete transparency when it comes to fees so we would advise landlords to always ask agents to provide a full breakdown of contractor costs, including any commission arrangement.

“If an agent wants to charge a commission or referral fee to the contractor for introducing the work, this kind of practice is not illegal and quite common in other sectors but the financial arrangement must be disclosed to the landlord so they are fully informed about any financial gain the agent will make.”

 
Check your contract with your Letting Agent carefully. Is there some small print saying that the Letting Agent is able to collect monies from contractors? Have you ever asked your Letting Agent what their policy is?

The result of this policy is that you may be paying more for your repair bills. Does the Letting Agent have any incentive to find you the best price quotation? When selecting contractors is the reputation of the contractor and quality of work, or the percentage they are willing to add, most important?

We have carried out work previously via Letting Agents, but as soon as a commission charge has been mentioned, we have withdrawn our services. We believe landlords should be invoiced directly for all Letting Agent fees, as this is the only way to ensure full transparency.

When providing services directly we are able to liaise directly with tenants to arrange an appointment and can work with landlords based anywhere in the country (and even abroad via email).

If you are quizzing your Letting Agent about 'secret commission', also ask about their arrangements for out of hours emergencies, as we have found these to be often lacking. Who would your tenant contact about a burst pipe on Christmas Day?