Compliance and legal complexity have emerged as the primary reason landlords engage letting agents, according to new research from landlord property management firm August.
The survey, which examined landlord sentiment around Making Tax Digital reporting requirements, found that two-thirds of landlords have altered their property management arrangements in the past two years.
Of those making changes, 26% have started using an agent, while 25% have left their letting agent to self-manage. A further 12% have switched between agents.
Compliance tops concerns
When asked about their motivations, 27% cited compliance and legal complexity as the main driver for their decisions, ahead of wanting more control at 22%, poor service at 20%, and the cost of fees at 14%.
Management fees represent a substantial cost for landlords. Among those who pay or have paid for management services, 58% pay 11% of rent or more, with nearly one in ten paying more than 15%. For a landlord with five properties letting at £1,000 per month, a 12% management fee amounts to £7,200 annually.
Despite the compliance burden, 69% of landlords indicated they are likely to be self-managing all their properties within two years, including 58% of those who currently use an agent. This shift mirrors broader changes in the lettings sector, as evidenced by recent portfolio acquisitions among letting agents.
Time burden of tax reporting
The research highlighted the administrative burden of Making Tax Digital requirements. Three-quarters of landlords expect each quarterly update to take at least four hours, with 41% anticipating four to eight hours and 34% expecting more than a day’s work. Only 6% expect the process to take less than an hour.
Across four quarterly updates, this translates to 16 to 32 hours annually for most landlords in scope, with more than 32 hours required for a third of respondents.
Legislation ranked as landlords’ single biggest concern for the next 12 months at 26%, ahead of void periods at 19%, mortgage rates at 19%, and tax at 13%. Only 2% said nothing in particular worried them.
Richard Samuel, Chief Executive of August, said: “The Government has been adding obligations to landlords for a decade without anyone tracking the hours. Quarterly digital tax reporting is the first one landlords can put a number on, and it is days, not minutes.”
He added: “Add the new database, the ombudsman, periodic tenancies and the paperwork around every rent increase, and the small landlord is now running a compliance function with no staff.”
Market implications
The findings suggest the regulatory environment is reshaping the buy-to-let sector, with landlords facing a choice between absorbing significant compliance costs through agent fees or dedicating substantial time to self-management. The trend comes as the wider property sector faces financial pressures affecting agency businesses.
Samuel concluded: “Some will pay an agent, some will leave, and the rest need tools that do most of this for them. That is what the next few years of the sector look like.”
