PropTech Today: New tech offerings require action from the high street

I’m spending a lot of time in airport terminals waiting for flights. They’re not the most comfortable of surroundings, but at least terminals give me time to catch up on all the latest property news and gossip.

This week, two stories in particular have caught my eye, especially given that discussions about the tenant fee ban have recently been ramping up with further Parliament discussions looming. Providing Brexit doesn’t get in the way again. 

The first story is that of Goodlord, the letting agent service provider which has recently announced a new energy switching and void management product for its users in partnership with Octopus Energy.

According to news reports, Goodlord Switch will let agents earn a commission for each property that signs up and remains with Octopus Energy.

The second story is that of CreditLadder, explaining how it has recently become the very first PropTech company to gain approval from the FCA to both initiate rental payment from banks and offer aggregated 'dashboards' to tenants.

CreditLadder can now offer tenants ‘aggregated financial dashboards...and can now ask banks to make rental payments on a tenant’s behalf and also offer them financial dashboards to show aggregated payments data from multiple accounts’.

At a time when the practices of high street agents are being brought into question, I think it’s important that they look at what these PropTech companies are doing to improve letting practices and entice tenants their way. 

This is even more important due to the fact that, if we’re totally honest, some elements of the current norm (i.e fees) are...cheeky. 

Here to speak more about this cheekiness, briefly, is Will Darbyshire, PropTech writer, and content strategist at my tech marketing agency, who has recently had some hands-on experience with London’s lettings market...

Never one to back down on a point of principle, Will was always going to take issue with fees and I knew, speaking to him last week, that he was having a crazy time as a prospective tenant trying to find the right place. 

Whilst some of what Will has to say is sure to spark disapproval from a few, I think, especially in the wake of the aforementioned recent rental technology milestones, it’s important to appreciate exactly how tenants feel about the current lettings ecosystem.

It’s the only way to understand why Goodlord and CreditLadder’s new offerings have such radical potential to disrupt.

I hope you find this interesting to see it from the other side... 

Will’s story 

My girlfriend and I have been looking for a new flat. We moved to London four years ago and have been living in a single room in a shared flat ever since.

Abi’s been completing a nursing degree and I’ve been trying to find some sort of stable salary in an economy that relies heavily on the currency of possibility and promises. 

Four years ago, we were paying £450 a month for a beautiful and enormous flat in Sheffield; we figured a budget of £1,400/month should be enough to secure us a decent one-bed in South East London. It had better be ‘cos that’s all we’ve got... 

Given my profession is, more or less, PropTech, I was determined to avoid agency fees. After a half-drunken rant from me one evening, Abi was determined to avoid them, too. 

For some reason, I thought avoiding fees would be easy. Given the plethora of PropTech companies out there, it shouldn’t be a problem. I was wrong. 

There are a couple of platforms out there which promote renting without the fees, I’m not sure I should name anyone, but we experienced a couple of big issues with them. 

First, their stock is rubbish. There was so little in our price range that we instantly started making compromises. I was surprised, a little disappointed. I assumed that there just wasn’t much stuff out there for the taking. 

We did find two flats we liked the look of; one in Forest Hill and the other in Honor Oak. This is when the second problem started happening. We were shown around the first property by someone who called herself ‘the building manager’ but to this day I’m not convinced. It was she we had corresponded with when we booked the viewing. The flat was listed by a hybrid lettings platform with no fees. 

The ‘building manager’ was showing us around, but she said there was an agent we would have to do all the payment and paperwork with. She would handle the maintenance for us, but the security deposit is going to the agent and then being flung into some government-recommended holding location, suspended somewhere between the internet and the moon. 

It was annoying how complicated it all seemed. Who am I meant to call for what kind of help? Is there anyone out there doing the whole all-in-one thing? Makes sense to me: lettings, payments, contracts, deposit protection, maintenance, all handled by one person.

I like having humans around to advise and help me, but I’m not into having this entire staff assigned to my home who might randomly pop around for some reason or another.

Still, who are we to complain? We took the place there and then. It was nice. Small but bright. I’m told brightness is key. We expected the market to move quickly so we went for it. The building manager looked genuinely shocked. It was weird. 

‘Oh…’ she said. 

‘What do we need to do next?’ I asked. 

‘I will let the agent know, and we’ll be in touch this afternoon’. 

‘Great’, I said. 

We left feeling pretty good.  Excited, even.

An hour later and a text comes through from the building manager:

“Hi Abi, really sorry but the flat is not actually available anymore. Someone had asked to take it without even viewing it - I had advised they view it first, so they agreed. Now that you’ve offered, they’ve decided to take it anyway. I have to give them precedence because they offered first.”

I wasn’t even angry. Just disappointed. Why the secrecy? If you’re going to play that game where you agree by word but then keep doing viewings until the money is guaranteed - it seems clumsy to me, but maybe it has to be done, I’ve no experience as an agent - I don’t understand why you can’t be open about that when arranging, or at least when conducting, viewings? 

It happened to us twice. Literally, the same thing happened twice, once with the hybrid, once with the high street. 

In the end, we ended up on the high street because, like it or not, they’ve got the best stock. 

The no-fee alternatives might save you some money one way, but I have a sneaking suspicion, and it is only a suspicion, that rent is slightly more expensive when there are no fees involved.

So, the high street has got better stock. They’re also much better organised, with a tenacity which sometimes crosses the line. The downside is those fees. In some cases, they’re absolutely atrocious and whoever is responsible for fabricating that maths should be ashamed. 

One place we really liked, the letting fees were a brutal £350 per person. Really? They want us to give them £700 in fees at exactly the same time we’ve got to provide six weeks’ rent for a security deposit and another four weeks’ rent upfront and all before we can get our current security deposit back because we’ve had to give our current landlord four weeks’ notice of moving out and couldn’t do that in advance because so many flats had been falling through for us. 

It’s just too much money and it’s not fair. 

Most agents we worked with charge between £400 and £500, all told, in fees. £400 is still an awful lot of money for people like me, but it remains on the fun side of affordable. £500 is a real stretch and another financial concern to be added to all the others that somehow live in the brain and the stomach at the same time. 

We have now secured a flat, for the time being, in Sydenham. Two beds at just £1,200/month and fees of just £380. £380 works for me. No problem. Especially given how decent our agent has been. I complimented his suit, he complimented my shoes. I dunno, we get on.

We didn't want to pay fees. But the truth is, the alternatives just aren’t up to scratch at the moment. The processes are muddy and frustrating and the stock is poor. They also, in my experience, seem to rely heavily on group viewings. Group viewings are the worst. 

I’m happy to pay what we paid for the service we were given and the flat we’ve ended up with. I might even have paid a little more, to be honest, because we were having a nightmare and this particular agent ended it for us. 

Those agents who are charging as much as £350 per person (by the way, don’t people just let the flat on their own, paying just one ‘per-person fee’ and then the spouse just live their anyway? That’s what we were planning to do), shouldn’t be taking on stock worth any less than £2000/month. It’s obnoxious to ask people who are chasing cheap rent to pay extortionate fees like some kind of vaudeville villain. Focus on those with a little to spend - get your money that way. 

Anyway, that’s all. Back to James. Cheers. 

As Will asks, a few paragraphs up, why is nobody trying to offer an all-in-one tech platform for lettings? Well, given the recent activity from Goodlord and CreditLadder, it seems that people might be starting efforts to create exactly such as service. 

Currently, it appears that on a practical level, the online alternatives to the high street are lacklustre. But that won’t always be the case. High street agents can only continue to remain the best possible option for tenants if they act to match the services that online alternatives are starting to offer.

Tenants want ease and affordability. Whoever best delivers those is most likely to enjoy sustained success. 

In terms of lettings fees, I remember so clearly charging £320 +VAT for Foxtons well over 10 years ago. It was a killer and generally the best negs were a) those that could get on with people and show them the right properties but b) could ‘sell’ the admin charge to get the deal over the line. 

I didn’t think it was fair then, I don’t think it is fair now. I know agents make a serious amount of money from these tenant fees but seriously, sort out your margins using better solutions so it is more streamlined and cost-effective. 

Be the agent that helps the tenants out, not just your landlords. You will never regret it - until you show properties that are already taken like Will had.

*James Dearsley is a leading PropTech influencer and commentator, and is co-founder of PropTech platform Unissu. You can follow James on Twitter here.