Letting agent vs HMO operator: what landlords should compare

Two legitimate models, routinely compared on the wrong axis

Owners tend to compare a letting agent and an operating company on percentage. That is the least informative number available, because the two are not selling the same thing. One is selling a service performed on your behalf. The other is taking the building on and running it. Everything that matters follows from that difference, and almost none of it shows up in the headline fee.

Neither model is better in the abstract. They suit different owners, different buildings and different appetites for involvement. What follows is what actually differs, stated neutrally, so the comparison can be made on the right axis.

The agreement

With an agent, you typically hold an agency agreement. The agent acts for you. The tenancy is between you and the resident, and the agent administers it. With an operating company, the building is typically taken on for an agreed term under an agreement between you and that company, and the company then lets rooms in its own right.

This is the structural difference from which the rest follows, and it is worth reading the document rather than the description. Whatever the model, the agreement should be explicit about term, payment, the split of responsibility, the condition the building is taken in and the condition it is returned in.

Who holds the relationship with the resident

Under an agency arrangement you remain the landlord, with the obligations that carries, even where the agent does the work. Under an operating arrangement the company holds the occupancy relationship and deals with the resident directly.

That changes who a resident calls at eleven at night, who handles a dispute between two people sharing a kitchen, and who is in the room if something goes to a tribunal. For some owners, distance from that is the entire point. For others, losing direct sight of it is the objection.

Who carries the day-to-day

Agents vary enormously in scope, and the phrase “fully managed” is not standardised — which is the subject of a separate guide. Some arrange repairs on your instruction and refer decisions back to you. Some hold a float and a threshold. An operating company generally absorbs the day-to-day entirely, within whatever the agreement says.

The useful question is not “is it managed?” but “what reaches me, and what do I decide?” Ask for the threshold in pounds above which you are consulted, and ask what happened on the last three jobs that crossed it.

Repairs and who pays

Under an agency arrangement, repair costs are generally yours and the agent instructs against your authority. Under an operating arrangement, the split depends on the agreement — commonly the operator carries routine repairs and maintenance while the owner retains structural items, but this is a matter of contract rather than a rule.

Do not assume either position. Get the boundary written down, including who decides what counts as structural, because that is the argument that actually happens.

Compliance responsibility

This is the one to be careful about, and the one where a confident verbal answer is worth least. Statutory obligations in a shared house attach to the person having control of, or managing, the property, and who that is depends on the arrangement you have signed. Some duties may remain with the owner regardless of who performs the work in practice.

In Bolton this currently sits on top of a moving licensing position and a borough-wide Article 4 direction, both covered in the licensing and Article 4 guides. Whichever model you choose, establish in writing who holds each obligation, who performs it and who evidences it — and take your own advice on it rather than anyone’s summary, including this one.

Reporting and evidence

Agency reporting is usually transactional: a statement, invoices, a periodic inspection report. Operator reporting tends to be exception-based: you hear about what is material and can ask for anything underneath it.

Neither is inherently better. The test for both is the same — can they produce, without notice and eighteen months in, the condition evidence for a specific room and the closing evidence for a specific repair? An arrangement that cannot is relying on your not asking.

Where each tends to fit

• An agent tends to fit an owner who wants to remain the landlord, retain the decisions, keep direct sight of the tenancy and the income, and pay for the administration of it.
• An operating company tends to fit an owner who wants the building run and the day-to-day to stop reaching them, is content with agreed written terms in place of transactional visibility, and values a single accountable counterparty over control of each decision.
• Neither fits an owner who wants the returns of an operating model with the control of an agency one. That combination is what most disappointment in this sector actually is.

Questions to settle either way

• What exactly is the agreement — agency, or a term arrangement over the building? Read it rather than the brochure.
• Who holds each compliance obligation, who performs it, and who evidences it?
• What is the repair cost boundary, and who decides what is structural?
• What reaches me, at what threshold, and how fast?
• What condition is the building returned in, and what evidence establishes the condition it was taken in?
• Who is the named person accountable for a case, and what is the route when the complaint is about them?
• What can you produce, without notice, eighteen months from now?