Rumours have been circulating about the U.K.’s largest online letting agency Upad but there was still shock and surprise when the company closed its doors to new business over the weekend. The company was setup 10 years ago by entrepreneur James Davis and was seen as a major disrupter to the traditional UK letting market. As well are transacting all company business online, the new fee structure placed huge margin pressure on traditional letting agents. Fast forward 10 years and it seems as though the disrupter has been disrupted by a market which is ultracompetitive and cutthroat.
Did the demise of Upad begin last September?
In hindsight, the demise of Upad probably began in September 2018 when the company announced a new fee structure. Aiming to attract as many landlords as possible, the cost of the find a tenant service was reduced to a rock bottom £149. The idea was that this competitive entry point would bring more landlords on board and allow the company to upsell an array of additional services. If successful, this would have cemented Upad’s position as the U.K.’s ultimate one stop shop letting agency. Unfortunately, this gamble does not appear to have paid off leaving many landlords and tenants concerned about the future.
Just recently it was claimed that Upad was used by 12,500 landlords with more than 30,000 properties listed on sites such as RightMove. Indeed up until the doors were closed just two days ago the company was still introducing new listings as clients looked to secure you tenancy arrangements. We will no doubt hear more detail about the demise of Upad in the days ahead but at the moment many landlords and tenants have been left in limbo.
Services, collections and refunds
Landlords who acquired unfulfilled marketing packages from Upad prior to 2nd October will not be eligible for any refunds. Those who acquired packages from 2nd October onwards will be eligible for a refund with further details to be announced in due course. The company also stopped collecting rents by direct debit after 10th October although any funds collected prior are held in a segregated account and will be paid out to landlords in due course. The same is true of funds held via the tenancy deposit scheme (TDS) which have all been transferred to the TDS custodial scheme and do not count towards the company’s assets.
Tenant landlord relationships
The ability to transact all business and communications online via the Upad platform made administration of tenancy arrangements very simple. The company has advised that existing landlords will need to contact their tenants directly to arrange alternative payment methods and address future legal and regulatory obligations. While a number of companies have stepped in to offer support to landlords caught up in the demise of Upad there is no doubt a degree of concern and confusion in the short term.
Is this the end of the online letting agency business model?
There is some irony in the fact 10 years after taking the market by storm, Upad, the disrupter has been disrupted by the new kids on the block. In hindsight, the signs were there back in September 2018 when the company reduced the cost of its basic package, looking to make up lost revenue by up selling more services. Even though rumours have been circulating for a few days, the sudden announcement that the company is closed to new business has rocked the industry. The last set of accounts to the end of March 2018 showed a loss of £1.4 million perhaps reflecting overall margin pressures for landlords and increased costs for buy to let investors.
Will we see a polarisation of online letting agents in the future, those looking at high volumes with low entry points and those looking to sell premium services for a premium fee? Could the demise of Upad create a domino effect for those operating a similar business model?