The Hidden Costs of Letting Agents and Property Management

 

Choosing a letting agent and property manager should be a big decision for landlords. After all, they are essentially managing not just income for them – sometimes, all of their income at that – but they are also nurturing the equity and growth in equity of one of their most valuable assets.

And when landlords do pick an agent, they have a tendency not to change! So actually, choosing the right agent from the start is all the more important – perhaps even more critical than the way people selling homes choose their estate agent (by comparison to lettings, only 14% people go back to the same estate agent to sell their property, according to Spectre).

 

How do Landlords Choose an Agent to do Business with?

On the surface, many letting agents look the same.

They advertise similar services.
They promise compliance, maintenance, rent collection and peace of mind.
And their monthly management fees often appear broadly comparable.

But there is often one particular difference between ‘corporate’ letting agents and independent operators like Your Home Managed. And I don’t mean just in terms of the more personal relationship and service, although that’s definitely another matter!

No – dig a little deeper into what corporate letting agents tend to provide, into the small print, the incentives, and how decisions are actually made — and the difference between large corporate letting agents and genuinely independent firms starts to become a little more clear.

For landlords, it is a difference can directly affect returns, property standards, and long-term value.

The Hidden Costs in Corporate Property Management

The extra expense issue isn’t usually the headline management fee. It is what sits around it or can be bolted on to it, often without landlords ever realising.

In many large corporate agencies, property management is treated as a separate profit centre, complete with revenue targets. This can lead to additional charges being built into maintenance and repair work, often buried in the Terms of Business (one does hope that they are disclosed somewhere!).

A growing number of industry voices have highlighted this issue because these hidden costs essentially harm a landlord’s returns.

One principal concern is the way that many corporate agents apply a percentage uplift to contractor invoices, on top of monthly management fees.

What do we mean by that? Here’s an example:

A plumber is called out to fix a leak. They charge the agent £200. The agent charges the landlord £240. A £40 fee that some agents argue is legitimate, as they have had to organise the visit and perhaps process the paperwork. But then, in that case, what is the 12% monthly management fee for? And if it is so legitimate, why not disclose it?

What’s worse is that because some contractors are actively on board with it, we hear that they are happy to issue two invoices: a weighted one, that the agent can show to the client, and the true invoice that the agent actually pays the contractor. The landlord, of course, has paid the higher amount to the agent.

The other way around it is for the contractor to bill the landlord directly… and then the agent issues the contractor an invoice for 10%, 20% etc.

It doesn’t really matter how it happens. One way or another, it is not what the landlord expects or would appreciate knowing.

 

When Agent Incentives are Misaligned from a Landlord’s Best Interests

In some corporate models:

• Contractors are “preferred” rather than independently selected (why ‘preferred’, you have to ask? Because of the referral fee they pay, one might now wonder)
• Quotes may already include a built-in uplift as described above.
• Additional arrangement or administration fees can also still be applied once works exceed a certain value.

The higher the contractor invoice, the more the agent earns.

That isn’t just expensive: it’s a conflict of interest.

The managing agent is no longer incentivised purely to:

• control costs
• protect the landlord’s asset
• maintain standards for tenants

Instead, maintenance becomes another revenue stream.

 

The Knock-On Effect for Tenants and Properties

These extra costs don’t just affect landlords.

When maintenance becomes more expensive than it should be, landlords may feel pressure to:

• Delay non-urgent repairs
• Postpone upgrades
• Avoid preventative maintenance

That ultimately impacts tenants and the property's long-term condition.

What can also happen is that landlords, at pains to recoup costs, feel more pressure to raise rents when the opportunity arises.

From our point of view as independent lettings and property management agents in South London, good property management should balance cost control, asset protection, and tenant wellbeing.

When fees stack up as we’ve described without transparency, that balance is lost.

 

How Independent Letting Agents Do Things Differently

We can’t speak for all independent letting agents, but we can outline our own approach and attitude to this issue.

At Your Home Managed, our approach is deliberately different.

• No percentage uplifts on contractor invoices.
• No hidden arrangement or administration fees (if we are managing a large project on a landlord’s behalf, we will charge an extra project fee that is fully disclosed, not hidden)
• No incentives to inflate costs
• No internal targets that lead to “extra charges”, because being smaller and more personal, we don’t have the sort of working environment where we are competing with each other in the office!

Contractors are instructed because they’re reliable, fairly priced, suitable for the job, and almost always because we have worked with them before and know and trust their work. There is certainly no thought of generating additional income. In fact, if we can save our landlords money on works, we consider it our job, well done.

What does this mean then? It means:

• Landlords know exactly what they’re paying for
• Tenants benefit from properly maintained homes
• Decisions are made based on what’s right for the landlord, not what’s more profitable to us as agents

 

Transparency isn’t a Marketing Gimmick, it’s a Business Model

The real difference between corporate and independent agents isn’t size.

It’s something else, and it’s hard to put our finger on it exactly, but of all the terms we’ve considered, perhaps the best is ‘alignment’.

We independent letting agents live or die by reputation, word-of-mouth referrals, and long-term relationships. There’s no distant head office to report to monthly, no shareholders other than ourselves to satisfy, and no pressure to exact extra revenue through hidden fees.

I suppose we can’t categorically say that this is all corporate agents – but hopefully, highlighting the issue exists can at least encourage you to ask the question of them if you are speaking to any or already using one.

Likewise, we can’t speak on behalf of all independent agents – but we can speak of our own approach at least.

For us, that’s the difference we bring to the table for our clients across Streatham and Streatham Hill, Clapham, Balham, Colliers Wood and Crystal Palace.

And for landlords who care about returns, property standards, and trust, we believe it’s a difference that matters.