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When taking account becomes taking a liberty

27 Feb, 2017


When taking account becomes taking a liberty

Occasionally, whilst I’m browsing the internet, a pop-up site launches that offers me the chance to learn a ‘secret’ technique to play the binary options markets (whatever those are) and make me rich beyond my wildest dreams in just a matter of weeks.

This scheme is known by different names in different countries and is, as you will already have guessed, an elaborate scam in which the victims quickly lose the trading deposit they’re required to place in a broker account.

And if all of that sounds Greek to you, don’t worry – because I’ve discovered a legitimate get-rich quick scheme that requires very little effort and delivers spectacular returns.

Become an estate agent.

No, seriously. This week I did some analysis of typical costs that landlords are likely to pay to estate agents managing their properties and tenancies and it’s no exaggeration to say I was staggered by what I found. I was also appalled and outraged.

It’ll come as no surprise to anyone who knows me that I have long believed the fees charged by lettings agents (who are, in most cases, simply estate agents with separate residential sales and lettings divisions) are unjustifiably high.

In this case I canvassed the fees charged by three very well-known, national estate agency chains – Foxtons, Savills and Hamptons International. 

There are a great many fees listed there with which I take issue, but one stood out head and shoulders above the rest: the charge of £120 to provide a landlord with their annual account statement.

Just let that sink in for a moment. All three companies charge their clients one hundred and twenty English pounds to have an annual account statement. And this involves what, exactly? Printing a document that, one assumes, already exists.

The three firms I chose to canvas will not be alone. Others will doubtlessly be charging very similar amounts for the same ‘service’.

Let me help you with the maths, here.

We’ll assume it takes five minutes for someone to click through to an account, bring it up on a screen, attach it to an email, send it and then process a hard copy for mailing (if company policy is to mail a hard copy – it may not be). Five minutes is, if anything, generous – I can access a client’s file and process a statement in significantly less time than that.

That’s an equivalent hourly rate of £1,440 an hour. Or a smidgeon south of £2.5m a year (with a four week holiday – presumably on a private yacht in the Seychelles).

Of course, those figures are a little misleading – you’d also need to have two and a half million customers to make them work for one firm.

But consider this. In 2014, there were around five million rented residential properties in the UK, owned by two million landlords. Let’s say that 75% of those tenancies are under management by an estate agent (the other 25% being self-managed by the landlord).

That means there are 3.75m properties which require an annual account statement at, for the sake of argument, £120 a pop. Which means the estate agency sector is generating £450m a year, just by clicking through to client accounts and pressing ‘print’.

The fact is, no one should have to pay to access the costs and expenditure associated with the rental of their property. At Property Wealth Management we would never even contemplate charging for that service and there isn’t an argument of which I can conceive that will convince me anyone else should.

If ever proof were needed that the residential rental market needs to be reinvented, the obscene fees estate agents charge for a service that is routine, mundane and ought to be complimentary is surely it.

*Fees quoted are publicly available on the agencies’ respective websites and were accurate at the time this blog was published.

Robert Evans is the founding partner of Property Wealth Management Ltd.