Watch this video to find out what landlords need to know about letting agents, or click here to read about it.
Letting agents provide a range of services which can be tailored to most landlords’ requirements. These include:
Before any landlord discards the idea of using a letting agent, they should think twice. As a tenant eviction company, at Landlord Action we’re contacted far more frequently by landlords who did not use a letting agent than those who did.
If living nearby the rental property, landlords may just want to use an agent to help find a tenant and draw up the agreement, but then manage the tenancy day-to-day themselves. I recommend landlords who do not live near their rental property should seriously consider a fully managed service.
Really good agents may also save landlords hassle and money by offering specialist services. These can include deals for specialist mortgages and tax advisors, as well as ensuring any works the agents organise are undertaken by trained professionals who offer a warranty for their work.
Some Pros and Cons of using letting agent include:
PROS
CONS
It varies. For instance, as a landlord you could:
Lots of landlords make the mistake of not putting a value on their own time as they think they’re saving money by managing their portfolio themselves. But all the time they spend doing that is time they’re not getting paid for.
Landlords should calculate how much time they’d spend every month managing their properties, and work out their hourly rate. In my experience, in many cases it’s a false economy.
Here are some of the responsibilities a managing agent will take responsibility for on behalf of a landlord:
Always choose a letting agent who is a member of The Association of Residential Letting Agents (ARLA) or another professional body such as:-
- National Approved Letting Scheme (NALS),
- The Royal Institution of Chartered Surveyors (RICS)
- UK Association of Letting Agents (UKALA)
- The Guild of Letting and Management
As with choosing an agent to sell a property, landlords need to pick a letting agent who is already successfully letting properties like their own in that area. It’s worthwhile talking to several different agents to negotiate and understand their terms before deciding which one to go with. Be sure to know exactly which services are included as part of a package and which would be at an additional cost.
Letting agents must, by law, be signed up to one of three government-approved redress schemes: The Property Ombudsman, The Property Redress Scheme or Ombudsman Services. They should also clearly display which they are a member of. If they don’t appear to be a member of one of these, stay well clear.
This legislation ensures that if a landlord or tenant has a complaint against an agent that they can’t resolve, their complaint can be handled by an independent third party.
As well as being a member of a redress scheme, it’s worthwhile making sure the agent has Client Money Protection Insurance in place. This covers a landlord’s rent and tenant’s deposit if the agent were to go bust.
This requires them to be members of ARLA, NALS, RICS or UKALA or, as bare minimum, ‘SafeAgent’. They’ll also need to belong to a redress scheme. Landlords can also look at reviews of their chosen agent from other landlords and tenants by visiting www.AllAgents.co.uk
As of 27 May 2015, all letting agents must display their fees in offices and on websites so landlords have a clear idea of any charges that are due.
Letting agents typically charge landlords a set-up fee and a percentage of the rent they collect (between 5% and 15%) on a monthly basis. They may also charge for certificates such as EPSs, gas and electrical safety.
Those that charge a low commission rate tend to charge a higher set-up fee and vice-versa, so most end up costing roughly the same overall. One piece of good news is that letting agent fees are all tax deductible.
There are two main types of agreement and landlords must be clear which they are signing up to.
The agreement should cover all contractual areas with the agent, and landlords should ask agents to take them through this so they understand each section. For example:
Other things to look out for:
Deposits – landlords should be clear about who is protecting the deposit in one of the government-approved schemes (Deposit Protection Service, MyDeposits or Tenancy Deposit Scheme).
If the agent will be responsible for this, the landlord should know which scheme it will be held with. If an agent fails to protect a tenant’s deposit or (worst case scenario) runs off with it – landlords are still responsible for paying the money back to the tenant.
Fees – some agents will have all-inclusive fees while others will charge for add-ons. Landlords should be clear on exactly what is included.
Rent – when and exactly how will this be paid to the landlord?
Termination – it’s not unknown for agency agreements to be heavy on fees and light on how to terminate the agreement. Landlords must be clear exactly how the agreement can be ended, and how much notice is required.
Clauses – landlords should beware of clauses which mean they must give six months’ notice or more if they wish to cancel the agreement. Three months is suggested as a reasonable cancellation period. Also watch out for clauses which suggest the agent be paid commission on renewals of the tenancy with the tenants they found, whether or not they are actually managing the property (some of these clauses may be invalid).
If a landlord is not happy with any clause in the agreement, it should be crossed out and both agent and landlord should initial the crossing out to make it clear that this clause is not included.
Landlords must ensure they are provided with a copy of the agreement after they have signed it.
The maintenance of a property can be costly. So it pays to keep on top of small everyday jobs to avoid them becoming larger and more expensive tasks. As well as letting and management fees, landlords need to consider the following:-
- Landlord Insurance
- Refurbishment and decoration
- Repairs
- Exterior maintenance – window cleaning, gardening
- Cleaning costs
- Loss of rent from a void period
- Tax on any profit made from rental income
If an agent is collecting rent from the tenant on behalf of the landlord, this should be passed on to the landlord as per the date specified in the agreement.
Reasons for not passing the rent on may include:
In both these instances, there should be written communication to prove that this was agreed between both parties.
If the tenant has defaulted on their rent payment, the agent will not have passed anything on to the landlord. But they should have notified the landlord at the first opportunity and got in contact with the tenant to find out why there is a delay with the payment.
Unfortunately Landlord Action has also come across cases of rogue agents who have pocketed the tenant’s rent and not passed this onto the landlord. They often become very difficult to contact in this instance.
Landlords who find themselves in this situation can call Landlord Action’s free advice line on 020 8906 3838 Monday to Friday 9am-5.30pm
With the ever changing laws and regulations surrounding buy-to-let, it’s not surprising landlords struggle to keep up. The services of a lettings and management agent can be essential for landlords who have properties far away, have very little experience of the industry or have a large portfolio to manage.
It can be tempting for landlords to cut costs and go it alone. But for those who aren’t fully versed in what is involved, how much time it takes and the responsibilities involved, my advice is to seek professional help. In the long-run it will be well worth it, particularly if you use a good reputable agent who supports your buy-to-let investment.