London letting agents are privately expressing concerns about how to structure commission fees following changes introduced by the Renters’ Rights Act, which mandates periodic assured tenancies for lets under £100,000 per annum to private individuals.
Patrick Bullick, Managing Director of Stanley Property London, has reported receiving numerous enquiries from agents regarding the implications of the new legislation, which eliminates fixed-term tenancies and their associated renewal dates—traditionally a key point for commission collection.
Current commission structures under pressure
Most London letting agencies currently charge commission upfront for a year, with additional fees when tenancies renew. This renewal commission creates an income stream that allows agents to charge lower initial percentages. According to Bullick, without renewal commissions, agencies would need to charge approximately double at the initial letting stage to maintain profitability.
The continuity commission model also serves to align agency interests with landlord objectives over the longer term, a dynamic that single-fee structures may disrupt.
Tenant mobility concerns
Under the new tenancy regime, tenants can provide two months’ notice at any time from the start of the tenancy. This flexibility raises concerns about tenant commitment and creates potential conflicts of interest for agencies operating on one-off fee structures.
Bullick noted that some larger firms already experience issues where branch staff receive no reward for renewals, potentially incentivising negotiators to move tenants between properties to generate fresh fees. The concern is that this practice could become more widespread under the new system.
Proposed solutions
Stanley Property London plans to address the issue by taking commission as rent is collected, for the full duration of the tenancy. The firm also suggests that serious landlords should consider full property management services given the increasing regulatory complexity.
For staff remuneration, Bullick proposes paying negotiators commission for the first 12 months, with a clawback mechanism if tenants leave before this period expires, deducting overpaid commission from future earnings.
The changes will require adjustments across the letting sector, with agencies needing to restructure both client fee agreements and internal compensation systems to maintain alignment between agent, landlord, and tenant interests.