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Letting a property successfully to a good, reliable tenant can be a time consuming process. The increasing complexity of legislation and the risk of hefty fines for non-compliance also add to the potential stress of letting out a property.
If, like many landlords, you are short on time or don’t live near your rental property, the benefits of using a letting agent are quite likely to outweigh the costs. A good agent, who knows the local area, will be able to rent your property out more quickly, for more rent, to a good tenant, saving you time and hassle.
But it is important to choose your agent wisely. Spend some time on your research ultimately there is no such thing as a ‘let and forget’ landlord and therefore you have to get your partner right.
Here, we offer some guidance to help you assess whether using a letting agent is right for you, and how you can identify an agent that meets your requirements. We’ll also highlight the importance of carrying out due diligence on the agent to minimise risks and make sure you are protected should anything go wrong further down the line.
The lettings market in the UK has been increasing in complexity for some time, resulting in an ever mounting workload for self-managed landlords.
Many landlords are likely to be asking themselves whether now is the time to offload some of the pressure by taking on the services of a letting agent.
You may want to consider using a letting agent if:
You might consider managing your property yourself if:
For those landlords who want to be hands-on, it’s worth joining a landlord association such as the National Residential Landlords Association (NRLA), to access support services, network and help stay on top of legislative changes.
You can also keep up to speed with the latest developments in the sector by subscribing to a landlord news website such as Hamilton Fraser’s news partner, LandlordZONE.
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. When comparing agents, here are some things to consider and some questions to ask:
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 Chief Commercial Officer of HFIS, 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.”
– Paul Shamplina
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. 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.
Sean Hooker, Head of Redress at the Property Redress Scheme, comments
“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. Sean Hooker explains the purpose of a redress scheme.
“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.
“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.”
– Paul Shamplina
With agents holding approximately £3 billion of client money, it is vital that clients should have the right to claim their money back if it is misappropriated, so a reputable agent should be able to demonstrate that they belong to a client money protection scheme.
Landlords should ask their letting agent to confirm that all landlord and tenant money, such as deposits, rents and maintenance monies, are held in a client account separate from the agent’s general bank account. Find out more in What landlords need to know about client money protection.
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.
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.
A reputable agent should be fully up to speed with all the latest lettings legislation. From the extension of the Homes (Fitness for Human Habitation) Act in March 2020 to the Minimum Energy Efficiency Standards and changes to capital gains tax which came into force in April, there is a plethora of new and existing legislation which letting agents need to be aware of. In Legislation for landlords – everything you need to know we look at this in more detail.
When choosing an agent, check how they will make sure that your property is compliant, for example, will they arrange for the annual gas safety check to be carried out by a qualified gas engineer? Will they make sure any soft furnishings comply with fire safety regulations? Ask the agent about repairs and maintenance too – will the agent carry out regular inspections to make sure the tenant is keeping the property in good order and check whether there are any maintenance issues? A good agent will be able to advise on these matters, although the legal responsibility for complying with legislation remains with the landlord.
Check that the letting agent has a proactive attitude to marketing rental properties, and that they will use a number of strategies to find tenants for your property. Are they active on social media? Do they advertise in the local newspaper? Do they have a prominent presence and good knowledge of your local area? Check that they are listing properties on one of the main internet portals to see how they market their properties, and how successful they are at renting out properties in your area.
Letting agents rely heavily on word of mouth for their reputation. Take a look at forum discussions and ask local landlords about their experiences with letting agents in your area. There are lots of blogs and websites where you can go and get reviews and see ratings such as Feefo and Trustpilot.
Get a feel for the popularity of an agent by checking out how many properties there are in the window. You can also find out what tenants think about agents by reading reviews of letting agents in the UK on the allAgents website.
Ask the agent whether they already have tenants on their books who might be interested in your property and ask them what level of rent they would expect to charge for properties similar to yours.
The agent should be able to show you details of properties that have let for a similar figure. Ask the agent what their average is with regards to void periods and how quickly they rent properties out again.
It usually makes sense to choose a letting agent that is located in the same area as your rental property. Knowledge of the local area is paramount when it comes to selling the benefits of a property, such as proximity to good schools and transport links, to tenants.
A local agent is also more likely to have a reliable network of professional contacts such as plumbers and electricians, which will enable them to attend to any maintenance issues promptly. Go to the agents’ offices to get a feel for them and their local knowledge of the area. If this is not possible due to social distancing, or the agent doesn’t have a high street presence, you should be able to arrange a video call with the agent instead.
Finally, it’s important to find out how the agent intends to work with you, for example, will they be available outside their standard opening hours?
If you have opted for a fully managed service and there are maintenance issues with the property, will they contact you before carrying out expensive repairs? Will you need to provide funds to cover any unexpected repairs? What is their notice period? How will they pay the rent?
Having thoroughly researched the market, decided on the right level of service for your needs and carried out due diligence on your preferred agent, it’s time to sort out the paperwork.
Here, Paul Shamplina offers his tips to reduce the risks of misunderstandings further down the line:
We have seen that there is a lot to consider when choosing a letting agent, and comparing them isn’t always straightforward. As a busy landlord, it might be tempting to sign up with the first letting agent you come across, rather than investing valuable time trawling through numerous agents.
Paul Shamplina cautions against this approach,
“Landlords don’t do enough due diligence on agents, yet this can make the difference between a successful let, or not. A good agent is really worth their weight in gold, and a bad one can lead to a lot of problems in the future.”
One problem that the Property Redress Scheme comes across from time to time is when landlords find themselves in a position where an agent they have been dealing with suddenly stops trading, leaving outstanding debts. When an agent does not comply with a legally binding decision made by the Property Redress Scheme because they are no longer trading, they are expelled from the scheme.
Suzy Hershman, Resolution Department Lead at mydeposits, offers a little known solution to this scenario.
“As part of our process, we now advise landlords and tenants in this position to contact Companies House to make sure the company has not already been struck off or applied to be dissolved. We know that doing this as early as possible in our process has meant success for some. Full guides and instructions can be found on the Companies House website.”
– Suzy Hershman
You can find out more about this process in a comprehensive guide Suzy has written for the Property Redress Scheme here.
Remember, the internet is your friend and a quick search can pay huge dividends in your homework. Look at the agent’s website and see how many properties they are offering, and whether the properties are recent and local to the agent.
Again, the property portals can reveal a lot and it is not unknown for agents to advertise properties from other agents miles away to boost their numbers. Review sites exist for agents and whilst some can be manipulated and scores misleading, ones like Marks out of Tenancy give a good indication of an agent’s standing with tenants. If an agent looks after your tenant, they will be looking after your interests and a happy tenant is a happy landlord.
A final word on the importance of carrying out due diligence when choosing a letting agent, from Suzy:
“Ultimately, using client money to service what should be a company’s responsibilities, or a director just plain pocketing the cash is a criminal offence. However, it is not always treated as such by the legal system. This is why we strongly advise landlords to undertake a little bit of due diligence before engaging any agent’s services and trusting them with any money.”
