What questions should landlords be asking when choosing a letting agent?
If you decide that using a letting agent is the right choice for you, the next step is to identify an agent that best meets your requirements. Research the market and draw up a shortlist before making your final selection.
Firstly, think about what level of service you’re looking for. Letting agents typically offer two or three levels of service, so ask what packages they offer. With a tenant-find only service, the letting agent will generally find the tenants and deal with the initial paperwork, such as collecting references, running credit checks, collecting deposits and drawing up tenancy agreements and inventories.
With a rent-collection service, the letting agent will also collect the rent from your tenants each month and chase any late payments. The day-to-day management of the property is left up to the landlord with both a tenant-find only or a rent-collection service.
With a fully managed service, the letting agent takes care of everything to do with the letting from start to finish, so they will not only find the tenants and collect the rent, but will also deal with any day-to-day issues such as property maintenance and inspections, for the course of the rental.
Paul Shamplina, Founder of Landlord Action and Brand Ambassador to Hamilton Fraser, advises landlords to seriously consider opting for a full management service.
Put a price on your time. Landlords who don’t have the time to manage their rental properties properly, or don’t live near their rental properties, should outsource the management to a good letting agent. The difference between a let only service and a fully managed one is actually much smaller than many landlords think. It’s important to put a price on the time you will spend managing a property yourself. What’s really important is for landlords to weigh up their own circumstances and think long term. No landlord wants to receive a direct call from the tenant at 2am to say that they have lost the keys or the boiler has broken down.
In these turbulent times, many landlords are following Paul’s advice, offloading the pressure onto letting agents and opting for a fully managed service.
LandlordZONE explores the benefits and the trade-offs of this approach in its recent article, Why are more DIY landlords looking to use agents on full management.
Although you shouldn’t be influenced solely by price, it is of course an important factor when you’re choosing a letting agent.
UK letting agent fees vary, but you can expect to pay somewhere in the region of 10 per cent of the monthly rent for a tenant find only service, and around 15 per cent for full management, although this can go up to around 20 per cent depending on the level of service, the area, and which agent you choose.
Check what agents are offering for their fee, including whether they charge for tenancy renewals, so that you can compare.
Top tip: A good agent should show you all the costs you’re going to incur and be able to tell you upfront what they are.
As of June 2019 when the tenant fee ban came into force, letting agents could no longer charge fees to tenants for things like inventories and referencing.
To minimise their losses, some agents have shifted these costs to landlords, sometimes as an additional fee and in other cases by absorbing the costs into the overall fee. It’s worth asking agents whether you’ll be expected to pay any extra letting agent fees as a result of the tenant fee ban so that you can take it into account when comparing competing agents.
Lettings is a competitive market, so you should compare several quotes and don’t be afraid to haggle, mindful that agents may charge extra for some services that are not included as part of the package, such as Right to Rent checks.
When choosing a letting agent, it’s vital that you carry out due diligence to make sure they are compliant with the law. In September 2019, London Trading Standards claimed that almost half of letting agents were breaking the law, putting landlords and tenants at risk of being ripped off. It’s important to make sure that you and your tenants are protected in the event that things go wrong with the let, or the agent misappropriates your or your tenant’s money.
I can only urge clients to make sure their agent is a member of a property redress scheme and a client money protection scheme and to ask to see proof. Most letting agents are compliant and do a great job, but sadly we have seen numerous cases of agents not passing rent onto landlords, illegal subletting to multiple tenants who are forced to live in unsafe and overcrowded properties, and ultimately stealing the rents and deposits of their landlords.
Property redress scheme membership has been mandatory for letting agents since 2014 and landlords should make sure that their agent is a member of one of the two government schemes.
A redress scheme is basically an escalated complaints service. Both landlords and tenants can use the redress scheme if the agent fails to resolve their complaint. We make decisions based on evidence presented and bring the issue to a satisfactory resolution. It’s a non-blame process – we’re not there to accuse and punish but to bring parties together. We recently launched a tenancy mediation service to help landlords, agents and tenants to resolve tenancy related issues without the need to go to court.
Client money protection has been mandatory for letting agents since April 2020 (this marked the end of a 12 month grace period following technical problems over the original April 2019 deadline), and landlords should make sure their agent is a member of a client money protection scheme such as Client Money Protect. Letting agents must display their certificate confirming their CMP membership in their offices and on their website. The legislation also requires letting agents to hold client money with a Financial Conduct Authority (FCA) authorised bank, and to have appropriate professional indemnity insurance such as CMP Professional Indemnity in place.
Tenancy deposit protection law requires all landlords and agents to put tenants’ deposits in a government-approved tenancy deposit protection scheme such as mydeposits. Depending on the level of service you opt for, it is likely that your agent will deal with matters concerning the deposit, which is held by the agent on behalf of the landlord as a safeguard against damage to the property by the tenant. Ask the agent for the details of the scheme they use and for confirmation that the deposit has been registered.
Having dealt with too many cases where landlords and tenants have fallen victim to ‘rogue’ letting agents who have misappropriated their money, I long championed the introduction of mandatory client money protection for our industry. Client money protection is a form of insurance – so long as an agent is a member of a scheme, landlords and tenants can be certain that their money is safe.
Agents are also increasingly offering deposit replacement alternatives, such Ome, part of the Hamilton Fraser family of companies, where a tenant pays a monthly membership instead of a one-off deposit.
Agents who are part of an accreditation scheme like ARLA Propertymark or safeagent (formerly the National Approved Letting Scheme) are also required to meet certain standards, comply with high codes of professional conduct and have proper guarantees in place to protect landlord and tenant monies.
