When it comes to understanding the possible problems with letting agents and how to avoid them, then this article will help highlight potential issues.
There’s no doubt that most letting agents will provide a sound service for those landlords who would prefer not to deal with their tenant directly.
That may be because they live overseas or do not live close to their investment property or simply do not have the time to dedicate to running their rental property effectively.
Whilst there are lots of very good letting agents in the UK, they will charge a fee for their service and this will vary.
If you want to consider hiring a letting agent, then you should choose an agent who is a member of a trade body, such as the Association of Residential Letting Agents – now known as Arla Propertymark.
Disadvantages for a landlord using a letting agent
However, there are disadvantages for a landlord using a letting agent, and they include:
- Fees: For some landlords, the letting agency fees can be prohibitive. A typical fee that is levied for managing the property can be 10% and up to 20% in some areas. The landlord may feel that this is a large slice of their rental income to hand over when they feel they may be able to carry out the task of drafting the tenancy agreement or even finding a reputable tenant.
- Relationships: it’s important that the landlord has a sound relationship with their tenant and communicate effectively. However, having a letting agent creates an extra layer and may slow down communication. There are surveys highlighting that many tenants are dissatisfied with their letting agent service, so the landlord runs the risk that a good tenant will move out because of this issue.
- Bankruptcy: it’s important that a landlord chooses a reputable agent with a professional reputation or run the risk that the agent may go bankrupt. If so, then the landlord will then be liable for outstanding money, including the deposit, that may be due to the tenant.
- Agreement: All reputable letting agents will have an agency agreement for you to sign. If they don’t, then the landlord must avoid them. It’s this agreement that sets out clearly what they will and will not do for their landlord client.
- Deposit: You need to be sure that the letting agent is protecting your tenant’s deposit in a government-approved tenancy deposit scheme. It’s now illegal for the agent or the landlord to keep the tenant’s deposit. You also need to tell the tenant, where their deposit is being held.
- Rent: You need to ensure that the agent is going to pay the tenant’s rent to you and know when this will happen.
- Insurance: Always ensure that your letting agent has professional indemnity insurance that will protect them and you from being sued and they have signed up for Client Money Protection – a legal requirement for them to do so.
- Safety: You will need to establish who is responsible for arranging the annual Gas Safety certificate inspection and who will keep the relevant records.
- Standards: You need to ensure that the agent you choose for your property will also meet the other standards and legal obligations, for example, ensuring that the furnishings meet fire regulations.
- Queries: It’s important that the letting agent responds to your tenant queries quickly and resolves any problems. You may need to pre-authorise spending up to a certain limit in emergency situations, so they can carry out a repair quickly.
- Contract: You may find letting agents try to sign you up as a client for a long term of two or three years. Be wary if this is the case because you may be signed up to a contract that may be difficult to get out of.
- Termination: When looking at a letting agent’s contract make sure there’s a termination point, so the contract comes to an end. Again, you need to be wary about an agency that does not make clear how the contract will be terminated. There may be an issue that the small print makes clear that the contract cannot be terminated while the tenant they have found and checked remains the property. Usually, this type of clause is not legally enforceable.
It’s also worth considering that the letting agent’s agreement is a crucial document because it establishes the business relationship between them and you as a landlord. You’ll need to understand it and read it completely before signing. If there are any parts within the contract you don’t understand, or they are rushing you to sign, then you should reconsider whether this is the letting agent for you.
Find a quality letting agent
As a landlord, you will also need to understand that the letting agency sector is unregulated, so it’s important that you take the time and trouble to find a quality letting agent and vet them thoroughly – remember the potential agent will work on your behalf. It may help that you:
- Only check those letting agents who have been established for a long time
- Give a good first impression when you meet them
- Have been recommended by other landlords (You can check online forums)
- Have lots of good potential tenants on their books
- Can prove what they do for their commission
- Have a professional office set up and are friendly.
For those landlords who are worried about the letting agent service, it is important that you keep copies of all the correspondence between you both – just in case the pitfalls of having a letting agent highlighted here become apparent.
Essentially, as a landlord your property is a valuable investment and you want it to be a success so it’s worth taking the time to find the professional agent that will meet your current and future needs as their client.