The growing complexity of the private rented sector means the cost of getting property management wrong could now far outweigh the cost of using a professional managing agent, latest analysis from Rushbrook & Rathbone reveals.
The property management specialist said landlords face increasing financial and legal exposure under the Renters’ Rights Act and wider tenancy regulation, with penalties for compliance failures potentially running into tens of thousands of pounds.
Rushbrook & Rathbone compared the average cost of a fully managed property service against a range of fines and penalties landlords can face for breaching tenancy rules.
Based on the current average monthly rent across England of £1,434, the firm estimates a typical 5% management fee would cost landlords around £860 per year. However, financial penalties linked to non-compliance can be significantly higher.
COMPENSATION CLAIMS
Landlords who fail to correctly protect a tenant’s deposit can face compensation claims worth up to three times the deposit value – equivalent to almost £5,000 based on the current average rental deposit.
Under the Renters’ Rights Act, landlords failing to provide tenants with the correct information at the start of a tenancy could face fines of up to £7,000 per tenancy.
The firm also highlighted wider risks across the sector, including penalties of up to £40,000 for serious breaches such as operating an HMO without the correct licence, breaching HMO licence conditions, failing to comply with improvement notices, illegal eviction offences and major gas or electrical safety failures.
Additional risks include rent repayment orders, right-to-rent penalties, EPC breaches and delays caused by invalid possession proceedings.
Rushbrook & Rathbone says the findings reflect how property management is increasingly becoming an operational and compliance function rather than simply an administrative service.
PROFESSIONAL MANAGEMENT
Sarah Rushbrook (main picture, inset), Founder of Rushbrook & Rathbone, says: “Many landlords understandably focus on management fees as a cost, particularly at a time when profit margins across the sector are under increasing pressure.
“However, the reality is that the cost of getting things wrong can very quickly outweigh the annual cost of professional management support.
“Property management today is about far more than simply collecting rent or arranging the occasional repair. Landlords are now operating within an increasingly complex regulatory environment where there are significant legal, financial and compliance obligations attached to managing a tenancy correctly.
“As the Renters’ Rights Act continues to reshape the sector, we expect professional management to become increasingly important for landlords looking to protect both their properties and their long-term investment.”
