The quiet revolution among letting agents

I have a suit but I hardly ever wear it. It’s only a cheap one, £100 from Zara’s a couple of years back, I use it for court sometimes. Some people were born to wear them; they carry them off, think George Clooney, Cary Grant. But do you know what I look like in a suit? The Defendant! That’s what, and it’s why I don’t feel comfortable in them.

Suits don’t feature in my natural habitat and I have never done a job that required me to don one. This is why I have also never been at all impressed by people wearing them, in fact whenever someone approaches me wearing a sharp business suit a little voice in my head always says “What are you after?” Suits actually make me suspicious.

People who wear them naturally always presumes that everyone thinks they look professional and business-like but I have surveyed my friends regularly down the years and I am convinced that although it may be true to an extent, 50% of the population actually think the opposite. A suit for them is a sign that someone may not be very trustworthy.

I mentioned this to a letting agent I knew once who was telling me how important a suit was to project the right image. When I told him about my on-going survey he looked totally perplexed. He had never considered that people could actually be thinking the exact opposite. He subsequently got done for fraud and money laundering. Readers of Property 118? I rest my case!

I know there are some great letting agents out there, some are personal friends of mine but even they would admit that letting agents aren’t generally high on people’s trust-list and what makes the great ones so good has nothing to do with the wearing of suits. In fact if people don’t trust letting agents and letting agents wear suits all the time, well, it’s a simple equation isn’t it?

I’ll come back to this suit thing in a minute.

I sometimes think that the only thing that unites tenants and landlords is their dislike of letting agents and the one thing both seem to have in common is the complaint about fees, followed quickly by crap and impersonal service. Regular readers will know I believe that letting agents should be regulated. I’m not alone in this. I know many of you think the same and many letting agents agree because the unregulated sharks in the industry, like the guy I mentioned above, give the good ones a bad name but I have been noticing lately a new development in the industry that I predict may actually make regulation unnecessary, and it’s coming from the inside.

It seems that each month more and more online letting agent services are being created. Section 52 of the Law of Property Act 1925 states that all conveyances of land must be done by deed and a tenancy agreement is a form of conveyance, a land transfer, if you will so the LPA covers it. However section 54 establishes that if the letting is for less than 3 years you don’t need a deed, that’s why a tenant doesn’t need a written agreement to be a tenant, it happens when they move in and start paying rent.

Some agents are cottoning on to this and are signing tenancy agreements digitally. They also offer reference checks and all the usual agent stuff for considerably less than their high street counterparts. Let’s face it, they don’t have the overheads.

I came across Open Rent, a new kid on the block run by Adam Hyslop and Darius Bradbury who offer a tenant find service, referencing and digital sign up for £20, charged to landlords and tenants. I immediately wondered how a high street agent could compete with that since agents will commonly charge tenants up to £400 and landlords sometimes the entire first month’s rent, which could run to well over £1,000.

Thinking this was just Open Rent with a unique idea I got into a chat with housing journalist Penny Anderson of Renter Girl blog fame and she told me about having interviewed Rent Lord, who are offering a similar thing. This set me thinking about the future of letting agents if this becomes the norm. Over the past few years I have seen an explosion in high street agents. I counted 29 within a 1 mile radius of my flat last year. What will happen to them if these cheaper online boys hit the mother-lode?

So I contacted Nigel Purves of Let Engine and asked whether he thought this was a fad, a relevant new development or the death knell for traditional letting agents, which is what I was thinking. Completely unbeknownst to me Nigel’s crew are doing the same thing. I had a look at his site and burst out laughing when the first words I read were “The no dodgy-suits way to let your property”, at last, a man after my own heart.

I asked Nigel why this was happening now and he said:-
“Ten years ago, people just weren’t ready. But since then ever larger & more complex transactions have been going online, and on the other side the technology has been getting both better & cheaper”.

He cited travel agents as a case in point. They have been closing shops by the shed load and offering online bookings instead. Nigel doesn’t think it is the end of letting agents per se but suggested they will have to adapt if they are to survive.

“Well if we’re right it means there’s going to be a lot more agents chasing a lot less work, and it will largely be full management instructions for landlords who are unwilling or unable to take charge of the process themselves. Obviously this will mean office closures & job losses but it’s also a massive opportunity for the industry. The best agents, the ones who go the extra mile to serve their customers, who always leave tenants & landlords feeling warm & fuzzy inside after all their interactions, will survive and thrive in the new world. They are worth every penny of their commission to the landlords who use them & will continue to be so. To the rest…I’m afraid it’s bon voyage”

If Nigel is right, then my view is that regulation of agents may simply be unnecessary because natural selection will push the rubbish ones out of business.

Still keen to pursue this thought I contacted Open Rent’s Adam Hyslop with the same questions. He replied:-

“We do also think that as momentum builds on the tenant side – for instance as admin fees of several hundred pounds stop being the “norm”, and tenants get background info on their prospective landlords in addition to the one-way referencing that takes place today – that pressure will mount on high street letting agents. This doesn’t mean their “death” – we have already pointed out they have some genuine advantages for some customers – but we hope it does mean they will be forced to improve service levels and demonstrate value for money in a way that often they don’t today”.

Both Nigel and Adam agreed that agents will have to change. Nigel sticking with the travel agent comparison suggests they could either go into niche markets in the way that STA and the Flight Centre did or into high end services.

There will always be landlords who need agents to manage their properties, such as those living abroad or those who are just located miles away from their properties. Also many landlords don’t want to be bothered with the whole tenant finding and sign up service, preferring to pay professionals to do all the donkey work.

But there will also be a huge middle market of landlords and tenants who resent paying what they consider to be extortionate rip-off fees. The backlash against agent’s fees has already started, with Shelter mounting high profile campaigns to expose unlawful and unfair fees in Scotland and Wales. This growing trend for online agent services is the latest kick and the writing is most definitely on the wall for many agents.

I agree with Nigel and Adam, I don’t think it will see the end of high street shops but it will seriously denude the currently overcrowded market and hopefully force the charlatans into a different kind of work, while the borderline cases will have to raise their game to compete. Lets face it, when was the last time you walked into a high street shop to book your holiday?

Many years ago now Stelios Haji-Ioannou hit the market with Easy Jet, no frills flights and went massive, totally transforming not only air travel but the way people live their lives, conduct their business and take their holidays. I predict that once this business model becomes established, online agent services will be first port of call the majority of landlords and tenants who have grown tired of what they see as expensive and poor service. Most importantly for me they can work happily away behind the scenes, in their pants if they want to, without trying to intimidate people with their power-suit. That will be the most radical change of all.

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