Tenant fee ban could spark letting agent consolidation, OpenRent founder says
Inefficient estate agents may not last if the Government implements its ban on tenant fees.
The founder of OpenRent expects a wave of consolidation among “inefficient” estate agents if the Government follows through with plans to eradicate tenancy fees.
Adam Hyslop – who co-founded his no tenant fee online agency back in 2012 – said traditional agents who find themselves short of cash after the prospective ban are likely to pass on costs to landlords, but could lose clients as a result.
“At least some of those fees will have to be kind of recouped by the agent in the form of higher charges to landlords, and if that happens, it means … that a lot of landlords will reconsider and re-evaluate the level of service they get and the amount they pay.
“And so hopefully they’ll look at alternatives even more readily than they currently do. So we think there’s a big opportunity for us.”
But agents unable to cope with the impact of the pending ban – which was first floated by Chancellor Philip Hammond during last year’s Autumn Statement – may stand to be absorbed by stronger rivals, he said.
“What generally happens in industries if they end up being inefficient and kind of struggling, is consolidation.
“So there are currently something like 16,000 letting agent branches across the country, and even someone like the Countrywides, LSLs of the world … represent maybe 1% or 1.5% of those branches, so it’s a hugely fragmented industry.”
However, while some landlords may turn to cheaper options, experts suggest that property owners who choose to stick with their traditional letting agents will just pass on those rising costs by increasing rents for their tenants.
OpenRent – which touts itself as the UK’s biggest letting agent, with around 50,000 listings last year – has been a proponent of the ban despite admitting that it would effectively make the company’s selling point moot.
OpenRent’s business model grew not only out of Mr Hyslop’s experience as a tenant, but his co-founder’s failed attempt to rent out his grandmother’s flat through a letting agent before taking on the task himself.
The company currently charges no fees to tenants, aside from £20 per person if the landlord decides to conduct a reference check through OpenRent.
OpenRent instead offers packages to landlords ranging from free listings solely on its site, to £49 to have a listing posted on the likes of Rightmove and Zoopla, book viewings, draft contracts, conduct tenant referencing, register deposits and collect the first month’s rent.
It also sells additional services such as gas safety checks, rent insurance and professional property photography, much of which is outsourced.
It has managed to keep charges low by automating a lot of its processes, and with only a handful of employees in London, OpenRent has been turning a profit since its second year of operations in 2013.
OpenRent managed to catch the eye of notable investors, having raised £4.4 million in funding from Rocket Internet’s venture arm Global Founders Capital earlier this year.
That is on top of a multimillion-pound media-for-equity deal with media conglomerate Northern & Shell in 2014, which gave the Daily Express newspaper owner a stake in the firm in exchange for exposure via advertising across its publications.
However, Mr Hyslop, his co-founder Daz Bradbury and their third business partner still own a majority stake in the company and are not looking to exit the business anytime soon – though partnerships could one day be on the cards.
“There’s loads of work still to be done and we’re hugely motivated by that,” Mr Hyslop said.