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17/12/25 3:30 pm
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Some large lettings agents are denting residential landlords’ rental yields by over-inflating property management costs, according to one London firm.
Many include clauses in their management Terms of Business allowing them to add around 20% onto contractor invoices for works carried out on a client’s property, explains Vashti Sperring, operations director at Maskells. The higher the contractor’s cost, the more the agent earns - and this is on top of the agreed monthly management fee.
She gives the example of one corporate estate agent’s costing for a replacement boiler at a fully managed property. It obtains a quote of £2,875 + VAT (£3,450) from a preferred contractor but the final bill comes to £3,306.25 + VAT (£3,967.50). This is because while the contractor cost to replace the boiler was only £2,500 + VAT, the contractor kickback (15%), inflates the quote to £2,875 + VAT, while the agent’s arrangement fee for works above £350 (15%) is £431.25, adding up to total additional fees of £806.25 + VAT (£967.50).
“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’, which is counterproductive to their key role of protecting their clients’ assets,” says Sperring.
These hidden costs are often added onto work performed that would be considered part of an agency’s property management services that landlords pay a monthly fee for.
Sperring says Maskells doesn’t charge arrangement fees, add commissions to third-party invoices or accept referral fees and incentives from contractors.
“Ultimately, the squeeze on cash flow and reduced investment capital could compel landlords to defer essential maintenance, repairs and necessary property upgrades, which would then directly impact tenants,” she adds.
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