Could you be due a significant refund from your letting agent???
It is common practice for letting agents to make substantial commissions on contractor works. On average this commission is about 30% to 50%, so if a job is £100, you will be charged £150. If over a ten-year period you pay £500 per year in contractor costs, you will have overpaid roughly £1660 (quite often considerably more). This is deemed a secret profit. Any profit an agent makes on contractor works is legally owed to the landlord. As a landlord, you are within your rights to ask what the contractor charged the agent and in turn what the agent charged you. You can ask for proof of the invoices and accounts as well.
Secret commissions in agencies
In lettings, if a landlord’s letting agent makes a secret profit, that profit is considered to be the property of the landlord. This means that any hidden profit a letting agent makes on your property is your money. If you have been with your letting agent for a number of years, this could be a substantial amount of money that is legally owed to you as a landlord.
Secret Profits – A Violation of Duty
Being a letting agent for a landlord is a position of trust which should not be exploited to make a secret profit.
If a letting agent is making a secret profit from contractors, the contractor will have to charge above the market rate for jobs to offset the letting agent’s contractor commission. This means that agents are not sourcing the best contractors but instead will only work with contractors they get kickbacks from. By making secret profits, letting agents raise costs for landlords and ultimately tenants, making private renting more expensive than it should be.
Payment of secret commissions is a form of fraud and are quasi-criminal acts. The events involving payment of secret commissions are actionable as civil claims.
They are treated seriously because:
- Receiving secret commissions is so serious that agreeing to receive them usually gives rise to right to terminate the agency relationship.
- Payments must be made to agents openly and honestly, due to the necessity for transparency in the dealings of agents and their trusted role.
Agents come under fire for skimming off 'secret profits'
Secret profits can be made on gas certificates, electrical certificates, painting, inventories, cleaning, gardening etc. Agents must ensure they disclose details of any arrangements they have for any secret commission to their landlords.
ACT NOW - What you can do as a landlord
Read your contract with your agent as they may have put in the small print that they charge contractors commission, and you may not be aware of this.
Transparency is Key
Rockett Home Rentals do not charge any form of commissions, referral fees etc to contractors and encourage all of our landlords to feel free to speak to our contractors to confirm they pay no commissions to Rockett Home Rentals and their invoice is the invoice the landlord sees and is not influenced by any form of secret profit.
Even if your agent refunds the secret profits and promises to never make a secret profit again, you just know they will find another way to massage their fees that will be harder to detect.
Feel free to contact us here at Rockett Home Rentals for a professional and ethical service.