Residential letting agents are not uniformly regulated; as such, the services available from them vary widely, and choosing the right letting agent can be tricky.
There are three things which all letting agents should be expected to do: find a good tenant; find said tenant quickly; and do so inexpensively.. Most reputable agents whose business has survived the market for more than a year or two will be able to deliver on these three broad necessities; beyond this, however, how will a landlord go about choosing a letting agent?
The required service
Would you like the most in-depth management service to abrogate the responsibilities of tenancy management, or the cheapest fees to manage your property economically and maximise your rental yields? Do you want to attract the highest quality tenants who will keep your property immaculate, or do you want the property filled quickly to avoid any lengthy void periods?
One benefit of letting agents not conscribing to a received set of standards and services is that many levels of amenity are available. Our article the role of letting agents outlines what is typically provided, but even the ‘let only’ service can vary a great deal between agents. Landlords who do not solicit a comprehensive service may find themselves taking on many aspects of the management of their property themselves, or delegating them to other agencies, but this is not necessarily negative; a landlord might wish to be responsible for repairs and maintenance, for instance, so that they can ensure the cheapest, quickest and most thorough job is done when needed.
The type of tenant that you wish to attract will play a role in deciding which agent to employ. An upmarket agency is less likely to entice students or lower-income earners, who might be put off by what they perceive as a potentially expensive service. On the other hand, a landlord who is looking to let their property to a professional tenant or tenants might consider an agent who is open on some evenings and weekends. Think of the letting agency as an ‘advert’ for tenants – the first impression they will get of you and your property.
How to find the right agent
Word of mouth is invaluable when deciding which letting agent to employ, as other landlords who have had experiences with them will be honest in their recommendation (or lack thereof).
Also be sure to look at an agent’s listed properties and see how similar to yours they are. A Victorian terraced house might stick out among dozens of new-build studio flats, but not necessarily in a good way. It is also safe to assume that an agent who lists many similar properties specialises in looking after, and finding tenants for, that type of property.
Don’t shy away from asking questions – in fact, a professional letting agent will expect it. What fees they charge, what they will include and what they charge extra for, upon which decisions they consult landlords, how many properties they manage and how often they let properties (a high proportion in this regard might not be encouraging; it could mean that tenants leave frequently, which will entail more void periods), how they advertise properties and vet tenants, the type of tenant they ordinarily attract, how long they have been operating and how much growth their business has seen since it began are all items of information which concern landlords and which letting agents should be happy to provide.
We also strongly recommend that the agency is chartered with a governing body such as the Association of Residential Letting Agents (ARLA), the National Association of Estate Agents (NAEA) or the Royal Institution of Chartered Surveyors (RICS). Registration with the Property Ombudsman is also worth checking for.
Two indicators that an estate agent is reputable are:
- Professional liability insurance (PLI) or professional indemnity insurance (PII). This insurance is obligatory for members of ARLA, NAEA and RICS; it covers against rewards for, and the cost of, claims for negligence, misrepresentation, unfair dealing and inaccurate advice.
- Client money protection. CMP schemes protect the landlord or tenant(s) should an agent misappropriate their rent, deposit or other client funds. This is also a requirement for any regulated agency.
Under the Consumer Rights Act 2015, letting agents are required to display prominently in their offices and online that they belong to a CMP scheme and/or redress scheme (if applicable).
Ask to see a sample contract and examine it closely. Letting agents are entitled to levy administration charges and additional service charges, but ensure that you know what these will be and that you are happy to pay them. You should have a firm idea what the monthly cost of an agency’s full management service will be, and it should comply with your monthly budget. Also ascertain what charges tenants will be made to pay; the ideal tenant might be warned off by excessive fees.
It is also not uncommon for letting agents to charge for void periods, though this should be a lesser amount than when the property is occupied. Also be wary of clauses which entitle agents to tenancy renewal commissions regardless of whether they continue to manage the property, or a percentage of the selling price if the property is sold to its tenants despite their not acting as the estate agent. These are examples of duplicitous small-print clauses on which the Financial Ombudsman has clamped down in recent years; such elements might now be considered null and void in most cases. Remember to seek legal advice if you are unsure of an aspect of the contract.
Under the Consumer Rights Act 2015, letting agents are required to display prominently in their offices and online what fees (including VAT) they charge to landlords and tenants, excluding:
- Charges, fees or penalties payable by the landlord to a third party, such as a contractor
- Deposits (but not holding deposits)
There are a number of statutory obligations to which landlords need to adhere. If you are employing a letting agent on a full management basis you need to check whether the service includes all of these obligatory duties. It may be that you have to pay extra, or assume the responsibilities yourself.
When it comes to repairing and maintaining the property, landlords are generally responsible; however, many agencies have a ‘minimum cost’ below which they will finance and conduct routine repairs or maintenance in order to expedite the process. If you would prefer to conduct all repairs yourself or hire your own tradespeople to do so, you can request that the letting agent contact you in all instances.
Useful things to remember
- Several agents operate a ‘no let, no fee’ policy, meaning that you can solicit a number of agents’ services and hire the one who most quickly finds a tenant.
- You do not have to use the same letting agent for all of your properties. Your portfolio might span a wide region, or include many different types of let, and ‘cherry-picking’ local and/or specialist agencies can ensure the optimal running of your business.
- If a number of letting agents fit all of your criteria, consider the one who has been in the area longest; this demonstrates a good knowledge of the local market, knowledge of local tradesmen, and the fact that their business is successful. You might also consider a smaller letting agent on the basis that your property will be managed with more attention.
- Keep records of all of your dealings with your letting agent and ask to check their accounting. This is because you will only see rent less fees and other deductions, and it can become harder to keep track of yields and profits. Request that your agent e-mail you copies of their own statements.