Landlords beware of hidden fees and commissions

February 10, 2014

Landlords are being hit with hidden charges by estate agents that are arranging property servicing and maintenance work through contractors, say industry insiders.

Landlords using estate agents to manage their properties typically pay a monthly fee of around 15% of their rental income. This service usually includes finding tenants, drawing up rental agreements and maintaining the property.

However, insiders say that agents are adding mark-ups of up to 20% to contractors’ bills to bolster their own profits, plus demanding a cut of up to 60% from contractors for the work they do. These charges are not clearly disclosed to landlords and they ultimately end up footing the bill.

A recent ‘mystery shopper’ exercise carried out by The Happy Tenant Company revealed estate agents were charging landlords six times the cost price for basic services such as gas safety checks, deposit protection and tenant referencing.

The company say that some agents are more focused on finding contractors that will agree to high commissions – up to 60% in some cases – in exchange for giving them large quantities of work, than finding quality tradespeople who will do a good job 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,” says Jonathan Monjack, a lawyer and chief executive of The Happy Tenant Company.

The Trading Standards Institute said it is aware such practices may be going on, but that it is yet to see any “hard, written evidence” that commissions are being passed from contractors to agents.

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