Chargeback fee for contractors, is this common practice?
Discussion
Today in my inbox is a mail from a letting agency that I undertake works for .
Basically it says that they have a provision with their clients(landlords) that they (the agency) can charge a fee to their suppliers ( us the contractors) for the gathering of work administrating the invoice and collecting the money on our behalf!
The figure they are going to charge is 10%
They go on to say that we cannot invoice for this amount and must consider it to be a business cost
So they want 10% OK it is what it is.
But its not 10% if im supplying materials is it? If I do works of £600 split £300 parts and £300 labour then I pay them £60 (10%) which makes my profit (labour) £240 i.e they are taking 20% of my profit. They also are saying that any other works undertaken by us requested by clients must be notified and a 10% charge paid.
I cannot believe that this a smart move
Tenants will suffer as I will not be clearing these works with any haste
Landlords will suffer as these costs will ultimately end up back in their bills
The churn on contractors will rise so service will suffer,in turn landlords will go elsewhere
Why do companies make these greedy grabs? Im sure somebody has just looked at the maintenance bills and thought "if we could get 10% of that."
Are we going to get paid quicker? Nope
Is this unusual?
Have others heard of it ?
Basically it says that they have a provision with their clients(landlords) that they (the agency) can charge a fee to their suppliers ( us the contractors) for the gathering of work administrating the invoice and collecting the money on our behalf!
The figure they are going to charge is 10%
They go on to say that we cannot invoice for this amount and must consider it to be a business cost
So they want 10% OK it is what it is.
But its not 10% if im supplying materials is it? If I do works of £600 split £300 parts and £300 labour then I pay them £60 (10%) which makes my profit (labour) £240 i.e they are taking 20% of my profit. They also are saying that any other works undertaken by us requested by clients must be notified and a 10% charge paid.
I cannot believe that this a smart move
Tenants will suffer as I will not be clearing these works with any haste
Landlords will suffer as these costs will ultimately end up back in their bills
The churn on contractors will rise so service will suffer,in turn landlords will go elsewhere
Why do companies make these greedy grabs? Im sure somebody has just looked at the maintenance bills and thought "if we could get 10% of that."
Are we going to get paid quicker? Nope
Is this unusual?
Have others heard of it ?
Perhaps they won't moan if you to bill a larger invoice than than you normally do, so you still get the same amout in your pocket...
Lettings were banned from charging fees to tenants recently, do either sounds like a dodge where landlord will pickup more by you invoicing more, or they are trying to bend you over.
Lettings were banned from charging fees to tenants recently, do either sounds like a dodge where landlord will pickup more by you invoicing more, or they are trying to bend you over.
Edited by hyphen on Friday 5th June 21:13
king middle menIf it was anything other than a way for the agent to claw back money surely it would be a fixed fee?
If they have to instruct a contractor to suply & fit a new boiler and the bill is say £2500,they take their 10% (£250) how have they had to do anymore work for that 10% than in the OP example!
As said, this will just get added on and the landlord will end up paying
If they have to instruct a contractor to suply & fit a new boiler and the bill is say £2500,they take their 10% (£250) how have they had to do anymore work for that 10% than in the OP example!
As said, this will just get added on and the landlord will end up paying
It's ludicrous and fundamentally dishonest. No one with any self-respect would propose an arrangement liked that. It's clearly an attempt to hide a cost from the landlord that will in reality be paid by them, and it creates an entirely avoidable conflict of interest. The agent works solely for the landlord. All of the agent's financial incentives should be aligned with the best interests of the landlord wherever possible. Taking a cut of the bill clearly creates an entirely perverse incentive. You'd hope most landlords would recognise this and refuse to accept these terms, but I imagine enough of them don't read the small print or think the details through too much. The agents ought to feel a duty of care to less professional clients to draw their attention to these potential pitfalls. They shouldn't be digging hidden traps for their clients. These ones get an ATG scumbag rating of 8 out of 10.
And they will add 10% onto the invoice amount too before sending it off to the landlord so they are grabbing from both ends.
I hate that sort of carry on. I am in the process of setting up a letting agency but it will have none of that sort of crap, i plan to have in house maintenance for 90% of repairs and charge fairly and openly for it.
Another bad tactic they use is not paying your invoice until the tenant has paid their rent that month, so if the tenant doesnt pay, you dont get paid. Be careful of that.
I hate that sort of carry on. I am in the process of setting up a letting agency but it will have none of that sort of crap, i plan to have in house maintenance for 90% of repairs and charge fairly and openly for it.
Another bad tactic they use is not paying your invoice until the tenant has paid their rent that month, so if the tenant doesnt pay, you dont get paid. Be careful of that.
I've met a few insurance loss adjusters/assessors who implement the same rules when dealing with property damage claims. i.e unless you agree to the fee you don't get on the tender.
The contracts are legal, but morally it stinks. All that happens is the price gets inflated by 10-15% and passed onto insurers, then in the long run onto policyholders
The contracts are legal, but morally it stinks. All that happens is the price gets inflated by 10-15% and passed onto insurers, then in the long run onto policyholders
dazwalsh said:
Another bad tactic they use is not paying your invoice until the tenant has paid their rent that month, so if the tenant doesnt pay, you dont get paid. Be careful of that.
interesting concept ! - have a think of how legally they could pay for something if they dont have the rent in yet from that landlords property. A clue - they legally cannot. Have look at the rules of Arla Nals (safeagent) TPO An agent cannot pay out from clients funds until they are in funds either from the rent received or the Landlord. They cannot use other clients funds. Sure you could pay from your office account but you would go bust quicker then you can smile.Another concept is that the contractors normal bill is £100 for a doing say a gas safety and service. this is to all and sundry. The agency angle will be the amount of work they give to that contractor will be massive and reliable and thus want a referral fee. The bill is still £100 to the landlord. the agency just pays £90. There is no disadvantage to the landlord. Again provided this is clearly stated in the agency T &C its above board and legal to do.
The benefit to the landlord is you get a contractor who has massive amount of work from the agent and thus will give their work a high priority and the costs are generally fixed/low and work quality is good.
Benefit to the contractor is that you will get massive amount of work and always gets paid.
Benefit to agency is you get a referral fee but a reliable contractor who does good work and a fair price.
Hey Dazwalsh good luck setting up your agency. You appear to be a contractor switching to agency.
Saleen836 said:
Just asked one of my neighbours about this as she works for a lettings company, her place doesn't charge the fee as they feel it is unfair, they did however adjust their management fees slightly
different business models but arguable this cost the landlord more. both ways must be disclosed to the landlord so its above board and legal.bristolracer said:
Today in my inbox is a mail from a letting agency that I undertake works for .
Basically it says that they have a provision with their clients(landlords) that they (the agency) can charge a fee to their suppliers ( us the contractors) for the gathering of work administrating the invoice and collecting the money on our behalf!
The figure they are going to charge is 10%
They go on to say that we cannot invoice for this amount and must consider it to be a business cost
So they want 10% OK it is what it is.
But its not 10% if im supplying materials is it? If I do works of £600 split £300 parts and £300 labour then I pay them £60 (10%) which makes my profit (labour) £240 i.e they are taking 20% of my profit. They also are saying that any other works undertaken by us requested by clients must be notified and a 10% charge paid.
I cannot believe that this a smart move
Tenants will suffer as I will not be clearing these works with any haste
Landlords will suffer as these costs will ultimately end up back in their bills
The churn on contractors will rise so service will suffer,in turn landlords will go elsewhere
Why do companies make these greedy grabs? Im sure somebody has just looked at the maintenance bills and thought "if we could get 10% of that."
Are we going to get paid quicker? Nope
Is this unusual?
Have others heard of it ?
This is a minefield. For all that it is seemingly quite common, it is also potentially problematic.Basically it says that they have a provision with their clients(landlords) that they (the agency) can charge a fee to their suppliers ( us the contractors) for the gathering of work administrating the invoice and collecting the money on our behalf!
The figure they are going to charge is 10%
They go on to say that we cannot invoice for this amount and must consider it to be a business cost
So they want 10% OK it is what it is.
But its not 10% if im supplying materials is it? If I do works of £600 split £300 parts and £300 labour then I pay them £60 (10%) which makes my profit (labour) £240 i.e they are taking 20% of my profit. They also are saying that any other works undertaken by us requested by clients must be notified and a 10% charge paid.
I cannot believe that this a smart move
Tenants will suffer as I will not be clearing these works with any haste
Landlords will suffer as these costs will ultimately end up back in their bills
The churn on contractors will rise so service will suffer,in turn landlords will go elsewhere
Why do companies make these greedy grabs? Im sure somebody has just looked at the maintenance bills and thought "if we could get 10% of that."
Are we going to get paid quicker? Nope
Is this unusual?
Have others heard of it ?
And, yes, I know it goes on all the time.
Who will you be making the invoices out to - each landlord or the agent?
If the invoice will be made out to the landlord, but you are going to be accepting short payment from the agent, unless you have an agreement in writing from the agent *on behalf of that landlord* then you are potentially engaged in conspiracy to defraud. I’d make sure what you have in writing is sufficient to protect you.
What about the VAT implications? Are you going to declare the actual revenue or the invoiced revenue for VAT? Is the agent going to give you a VAT receipt for the commission? What is it 10% of?
I’ve seen this done even more blatantly in the insurance industry - invoice + credit note (10%) issued to intermediary. Insurer receives invoice and pays it, intermediary pockets the credit note difference. You can imagine how that looks when it is found at an audit.
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