Dec 16, 2024 2:28:59 PM

Property Management Company Fees

In this guide, we’ve reviewed the average fees of 10 letting agents, both national and local. This guide is independent, not sponsored, and we do not endorse any mentioned companies. We are an independent lettings agency based in London.

Using a property management company is a great idea, however their fees can often put off landlords from hiring someone to handle the rental process. Sometimes, the costs might outweigh the benefits - especially when there’s a high monthly fee and hidden fees that are buried deep in the fine print!

On top of that, the property industry is known for not being transparent, making it hard to find straightforward pricing information or decide which service is best for you.

To help landlords in London understand the costs, we’ve created the guide below on average property management company fees, which will break down the difference in fees from national and local property management companies. Besides showing typical prices, we will also look at hidden fees and explain what to watch out for to make sure you’re getting the best deal.

Property management company fees

Most property management companies offer a variety of packages, and it can be tough to figure out what makes each one unique. So it’s really important to read and understand the terms of each package because you might see a fee that works for you, but the package might not meet your needs. In short, don’t pick a package just because it has a low fee.

The fees listed below are for the three most common packages most property management companies offer, which are a fully managed service, let and rent service and let only service. Some companies might also do short term lets (or holiday lets) but this isn’t covered in our guide.

Fully managed service: Finding a tenant, collecting rent, dealing with queries, checking compliance, arranging maintenance and doing inspections.

Let and rent service: Finding a tenant and collecting rent each month.

Let only service: Finding a tenant only.

National agencies

Average fully managed fee: 17%

Range: 13% to 20%

Average let and rent fee: 11%

Range: 10% to 15%

Average let only fee: 75% to 100% of first month’s rent (subject to minimum fees, e.g. £699)

Note: The above fees don’t include VAT.

Example: Foxtons is a national property sales and lettings chain. They charge 17% per month for their fully managed service. Including VAT, this fee is 20.4% per month.

In Real Life: If you were paying a 20.4% fee on £2,000 rent. This means, your letting agent will be charging you £408 and you’d be receiving £1,592.

Honest Lettings: By switching to us, you’d save £309 a month.

Local agencies

Average fully managed fee: 13.6%

Range: 10% to 17%

Average let and rent service: 10%

Range: 7% to 12%

Average let only service: 6% per month or 75% to 100% of first month’s rent (subject to minimum fees e.g. £450)

Note: The above fees don’t include VAT.

Example: There are several high street property management companies that serve local markets, charging a fee of 15% per month, which becomes 18% including VAT.

In Real Life: If you were paying an 18% fee on £2,000 rent, this means your letting agent will be charging you £360 and you’d be receiving £1,640.

Honest Lettings: By switching to us, you’d save £261 a month.

Additional fees (typical and hidden)

Some property management companies claim their packages and fees are all-inclusive, with no hidden charges. They often promote transparent pricing, implying that landlords won’t face any surprise costs. However, this isn’t always true. Many landlords discover that extra fees still sneak in.

A lot of property management companies have hidden fees in their contracts. Some of these fees are understandable, like for gas safety inspections or any other inspection where a third party contractor needs to be hired. But others are not so reasonable and are unexpected. For example, an agent might charge extra for routine maintenance or basic administrative tasks, which you would think are already covered by the management fee. This could include administrative costs for minor repairs or arranging work. Before signing any contract, it’s important to carefully review the fee structure and know exactly what is included to avoid any unwanted surprises later on.

Typical fees:

Tenancy set up fees

While we never charge extra for setting up a tenancy, many companies do - local and national. This fee can either be a percentage of the first month’s rent or a flat rate. For example, some local agents charge £399 just for starting a tenancy, on top of their monthly management fee. This means landlords need to be aware of these additional costs when comparing services - because an extra few hundred pounds just for setting up a contract is commonplace.

Inventory fees

Inventory checks are crucial before a tenant moves in, and they usually come with a fee. This fee covers the cost of a third-party contractor who visits the property to conduct a thorough inspection and create a detailed inventory report. This report documents the condition and contents of the property, helping to avoid disputes at the end of the tenancy.

These checks are optional but are recommended. Costs can vary but usually float around £100 to £150 for check-in (start of tenancy), and £85 to £155 for check-out (end of tenancy).

Compliance fees

Ensuring compliance with safety and regulatory standards is essential, and this also incurs a fee. Like inventory checks, compliance checks or reports are done by third party contractors. They perform necessary checks, such as gas safety, electrical safety (EICR) and energy performance (EPC) assessments and then produce reports to certify that the property meets all required standards. These fees ensure the property is legally compliant and safe for tenants.

Compliance fees are compulsory. A gas safety certificate usually costs around £50; an EICR costs around £100 and an EPC costs around £45.

Hidden fees:

When we say hidden fees, we mean they’re hidden because they aren’t explicitly stated in the contract, they are usually buried in the fine print or in a document called ‘terms of business’. Hidden fees in property management refer to the fees you didn’t know you had to pay, which are on top of the monthly fee.

Below are some examples of hidden fees you might need to pay to some property management companies:

Arranging works:

In our review, most property management companies charged a 10% fee of the invoice cost for arranging work at a property that is 'beyond the scope of the agreement'. This might seem fair for major renovations that improve the property, but often, the 'scope of the agreement' is smaller and blurred than what most landlords would need during a tenancy.

Usually, agents set a cap of £1000 before extra charges apply. However, you might still end up paying extra for essential maintenance, which should be covered as standard in a fully managed service. If a landlord is already paying 20% of their annual rental income for management services, it's hard to see the value in additional charges that seem to take advantage of unfortunate situations.

To avoid unexpected charges, make sure to read the terms of business carefully and ask for a clear definition of what is included in the agreement.

Many agents also charge extra if someone from their office needs to visit the property to meet a contractor and provide access. This service usually costs around £60 per hour. It’s hard to understand why such an essential task isn't covered within the typical fee for fully managed services.

Contract renewal:

Based on our review and past experience, many agents charge fees for renewing tenancy agreements. These fees are applied after the current agreement ends and before the new one begins. Essentially, it's a charge for extending the existing contract without significant changes, except perhaps when negotiating a rent increase.

Contract renewal fees are typically around £125 plus VAT. While this might not seem like a huge expense since it’s only charged once a year, it’s an unnecessary cost. The renewal process generally involves minimal effort, especially if there are no significant changes to the terms. For example, for renewals, landlords and tenants don’t need to sign the contract again - it’s the same contract with possibly a higher rent (if agreed) and new dates. So, even though renewing a contract should be included as a standard part of the service, it’s often an additional fee that needs to be paid.

Admin:

Admin fees are charges for various administrative tasks that a property management company performs in relation to your property. These fees cover the extra time and effort agents spend on specific duties, and they seek compensation for these additional services.

In our research, we found that most property management companies charge admin fees because some tasks require extra time and effort. They want to be compensated for the additional time they spend working on these services for you.

Deposit registration:

Some agents charge an admin fee for registering your tenant’s deposit with a government-approved scheme, which is a legal requirement. While this might seem reasonable, as it is a necessary task, it also feels unnecessary because it’s already a legal requirement for letting agents in England.

Tenant background checks:

Another common admin fee is for handling tenant references and background checks. This involves verifying a potential tenant’s employment status, credit history, and rental references. This process ensures that the tenant is reliable and financially stable, but it also means additional costs for the landlord, which are often passed on through admin fees.

In our review, these fees were generally included in the tenancy set up fees we talked about above. But, some national agencies had a separate fee starting at £30 plus VAT.

Monthly financial reporting

Agents typically charge around £30 per statement for providing monthly financial reports.

Reporting to HMRC for non-resident landlords

This service can cost anywhere from £60 to £540 plus VAT, depending on the complexity.

Dispute handling

If you need to withhold funds from the tenant deposit because of a dispute, agents might charge between £120 and £600 plus VAT.

(This is one reason why it’s crucial to have landlord insurance in place, because a lot of policies cover costs that might come out of a dispute with your tenants over their deposit.)

These tasks are crucial and can be quite difficult for landlords to manage on their own. Therefore, it's puzzling why these essential services aren’t included in the supposedly all-inclusive management fees. Ensuring these administrative duties are covered by your agent can save you time and stress.

Honest Lettings

Honest Lettings has lower fees, better service and is way more transparent.

We’re a property management company in London with a very simple fee structure:

You pay a monthly fixed fee. That’s it.

No admin fees, no hidden costs, no tenancy set up fees.

Our packages are:

Fully managed service: £99 per month

Let and rent service: £75 per month

Let only service: £49 per month

Note: Our fees already include VAT so you won’t pay a penny above what you see.

Our most popular package is the fully managed service. Here’s what’s included:

Finding a tenant
Collecting rent each month
Marketing on Rightmove and our extensive network including with local councils
Four point check on every tenant including right to rent, credit, occupation and reference checks
Inspection every 6 months
Registering deposit with a government approved scheme (MyDeposits)
Arranging works and maintenance (negotiating lower prices with our vetted contractors)
Negotiating rent reviews
Dedicated property manager, contactable through phone, email and WhatsApp
Access to online portal for landlords and tenants
Same hour rent payments
Rent statement every month
Subsidised compliance assessments and reports
Tax exemption certificate for overseas landlords
Assisting with deposit disputes