Independent agent exposes “hidden costs” of corporate agencies 

A prominent independent lettings agent has set out what she calls “the hidden costs harming landlord returns” – and charged by corporate agents.

Vashti Sperring, operations director at Maskell agency, says the fine print of a contract often reveals that many corporate agents include clauses in their management Terms of Business allowing them to add up to 20% or more onto contractor invoices for works carried out on a client’s property. 

“This not only inflates maintenance costs for landlords but also creates a clear conflict of interest: the higher the contractor’s cost, the more the agent earns – and this is in addition to the agreed monthly management fee” she adds.

Sperring claims some firms view their property management department simply as another profit generator, engaged in maximising income for their company, with some setting clear targets for ‘extra charges’, and which actually goes against their key role of protecting their clients’ assets.

She says the consequential squeeze on cash flow and reduced investment capital triggered by this extra cost could compel landlords to defer essential maintenance, repairs and necessary property upgrades, which would then directly impact tenants. 

And she gives what she calls “a genuine like-for-like quote comparison and example of the additional fees and charges a large corporate firm would charge for what should be considered basic property management” that a landlord would expect to be covered within their monthly retainer. 

Example: Replacement Boiler

Corporate Estate Agent (CEA) 

A fully managed property needs a replacement combination boiler. The CEA obtains a quote of £2,875 + VAT (£3,450) from a preferred contractor. The landlord agrees and the boiler is replaced. The final bill, however, comes to £3,306.25 + VAT (£3,967.50) – significantly higher than the true cost of the work.

Breakdown of cost:

• Actual contractor cost to replace boiler: £2,500 + VAT
• CEA contractor kickback (15%), inflating the quote to: £2,875 + VAT
• CEA arrangement fee for works above £350 (15%): £431.25
• Total charged to landlord: £3,306.25 + VAT (£3,967.50)
• Total additional fees gained by CEA: £806.25 + VAT (£967.50)

Below are the equivalent fees and charges for the same work completed by the Maskells Property Management team:

• Third-party invoice to replace boiler: £2,500 + VAT
• Incentives received: £0
• Arrangement/administration fees: £0
• Total charged to landlord: £2,500 + VAT (£3,000)
• Total additional fees gained by Maskells: £0

In this one single example, Sperring says a landlord saves £967.50.

And she concludes: “Transparent management isn’t just about good and honest practice, it directly impacts a landlord’s bottom line.”

This article is taken from Landlord Today