With a ban on letting fees in England set to enter the law books this summer, the way in which agents generate revenue is set to change.
Currently, letting agents and landlords can charge tenants administration fees, inventory fees, renewal fees, credit check fees and exit fees. But when the Tenant Fees Bill is enacted into law on 1 June, companies will only be able to collect rent and deposits.
According to the government, these changes will “strike a fair balance between improving affordability for tenants while ensuring that landlords and agents have the financial security they need.”
In light of this legislation, many letting and real estate agencies are looking for new ways to replace the revenue streams they’ll inevitably lose. We explore the opportunities posed by technology.
Capitalising on new software
Like many other agents, Peterborough-based Progressive Lets has adopted a range of software-driven approaches to cut costs and increase revenue before 1 June.
Operations manager Stephanie Forrester tells PlaceTech: “We have moved to online platform Goodlord to streamline and consolidate our referencing and moving process.
“Letting agents are talking about not referencing tenants at all to save the cost, apart from legally required right to rent checks. Many, including us, are considering using the Rightmove Passport system where we have visibility of tenants previous payment history, County Court Judgements, previous landlord references, passport verification and income validation.”
While the company has begun seeing rewards from adopting software platforms, Forrester believes that there are still challenges ahead. In particular, she believes the industry and consumers will be affected by price rises.
She adds: “We have reduced our headcount by one person by using this moving process so it has been beneficial. Whether we charge landlords for this cost is still as yet undecided. The cost will need to be recovered from somewhere, so we expect rents to continue to rise to compensate for any increased costs to our landlords.”
Vik Tara, CTO at Technology Blueprint and PropCo, says the adoption of new technology will help businesses leverage new opportunities. “All agencies should be looking at their service lines from a cost and benefit perspective. Smart tech choices are an ideal way to reduce waste and increase productivity in your teams,” he says. “This can both drive down cost and increase revenues from new business, so long as your team is up for making the most of the time the tech saves them.
“Tech that enables you to easily provide new services for a marginal cost – like heightened regulatory compliance services for landlords, utility bundles, move-in arrangements, furnishing, and property care services for tenants, and networks for contractors – will bring you new revenues to fill that gap.”
Streamlining property management
Marc Trup, founder of Arthur Online property management software, calls the ban a “huge blow” for the lettings sector. However, he notes that the advancement of modern proptech systems means portfolio management has become easier and less costly.
“These savings, enabled through using technology, help offset losses from the letting fee ban. For example, landlords can now manage portfolios remotely, and can expand their portfolios without being limited by location,” says Trup.
“Being able to manage all manner of issues directly online was simply not possible a few years ago, and this offers landlords new opportunities for expansion and gain greater revenue.
“Virtual management is a relatively new phenomenon in the UK, and with the recent advancements in proptech, it has revolutionised the industry. It has made the lives of landlords easier and is also saving them considerable time and money.”
Online reputation is key
Daniel Mathew, vice president of location marketing technology firm Uberall, says many letting agencies aren’t making the best use of technology that is readily available at their fingertips.
“This is especially troublesome in the face of negative impacts on their revenue streams, such as the impending letting fee ban,” he says. “It’s essential that letting agencies prioritise the use of tech in order to reach more potential clients and maximise their revenue.”
He says one of the most effective ways to reach new clients is to manage the business’ online presence. “With 40% of new real estate business coming from recommendation, it’s vital that social media and online reviews are actively managed so that potential clients know who to trust.
“Property is a people business, and technology that fosters relationships is ultimately the digital tool that will help letting agencies weather changes to their revenue stream, whether that’s a ban on letting fees or the next challenge the industry is facing.”
Leveraging emerging technologies
Rental payment platform PayProp UK is one of the companies helping property businesses increase their revenues. Used by the likes of Hunters, Remax, Sotheby’s, Harcourts and Keller Williams, it applies automation to financial management in the property space.
Neil Cobbold, chief operating officer of PayProp UK, says: “The best-prepared agencies will already be using proptech to their advantage, helping them to be more efficient and offer a more streamlined and effective service to landlords. Not only can streamlining help agents to replace lost revenue, a slicker business model which embraces technology will improve an agent’s landlord proposition. As landlords’ costs inevitably rise, a letting agency which is on top of crucial issues such as payments, rent arrears and property maintenance will become more indispensable than ever.”
“Agents should also consider automation and how it could increase their cash flow, save them time and improve their client retention rates. Post-introduction of the fees ban, I believe we will have a leaner sector made up of proactive businesses that provide a wider range of services for consumers.”
Brooke Williams, CEO and founder of property maintenance platform Sorbet, advises: “Identify paper-heavy processes and adopt a digital-first policy. From printing copies of move-in packs or storing paper certificates, going digital will have an immediate effect to both your business processes and overheads from printing, paper and associated administration cost.
“Use what you have. Your employees are your most valuable asset. Rather than immediately reducing headcount, use your employees to win new business whilst using technology to take care of the administration.”
While the incoming lettings fee ban is certainly worrying for some in the industry, businesses that use tech to generate new opportunities and streamline their businesses are likely to come out on top.
Tell us your thoughts below