Growing compliance demands are splitting the PRS, pushing some landlords towards letting agents while others plan to take management in-house, a new survey suggests.

Property management platform August’s poll of 276 UK landlords found that two-thirds (65%) have changed their management arrangements in the last two years; 27% have left a letting agent and now self-manage, while 26% have started using an agent and 12% have switched agent. The most common reason was compliance and legal complexity (27%), ahead of wanting more control (22%), poor service (20%) and the cost of fees (14%).

Among those who pay or have paid for management, 58% pay 11% of rent or more, and nearly one in ten pay more than 15%. For a landlord with five properties each letting at £1,000 a month, a 12% management fee amounts to £7,200 a year.

Despite the growing compliance burden, 69% of landlords say they are likely to be self-managing all their properties within two years, including 58% of those who currently use an agent.

August chief executive Richard Samuel tells LandlordZONE that this latter group is made up mainly of larger, younger landlords using full or mixed management and paying higher fees. He says most plan to grow their portfolios.

Mixed

“Among landlords on full or mixed management who haven’t changed anything, the figure is about a quarter. Over-65s are the least likely to plan to self-manage, at 13%.

“We believe the market is splitting. Compliance is pushing some landlords towards agents and pushing others to take control and use better software tools and in-house teams.”

Its survey also found that the majority of landlords expect digital tax reporting to cost them between two and four working days a year. Of those in scope for Making Tax Digital, when asked how much extra time each quarterly update takes, three-quarters (75%) expect at least four hours, 41% expect four to eight hours and a third (34%) expect more than a day. Only 6% expect less than an hour. Across four quarterly updates, that is 16 to 32 hours a year for most landlords in scope, and more than 32 hours for a third of them.

Adding

“Government has been adding obligations to landlords for a decade without anyone adding up the hours,” says Samuel. “Quarterly digital tax reporting is the first one landlords can put a number on, and it is days, not minutes. Add the new database, the ombudsman, periodic tenancies and the paperwork around every rent increase, and the small landlord is now running a compliance function with no staff.

“Some will pay an agent, some will leave, and the rest need tools that do most of this for them. That is what the next few years of the sector look like.”

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