Letting Agents – 5 Questions
In light of last weeks the decision by Foxtons not to pursue an appeal against the High Court ruling made against their terms and conditions, and their charging of tenancy renewal fees. We thought it timely to remind landlords of the five critical questions a landlord should ask before employing a letting agent.
The Foxtons case & letting renewal fees
Firstly the decision by Foxtons not to appeal should not be such a huge surprise. Foxtons have taken the sensible low risk option which allows them to continue to charge tenancy renewal fees in return for reducing the size of the renewal fee. Disappointedly, it has not clarified the situation on whether renewal fees themselves are actually fair.
Letting agents justify tenancy renewal fees on the basis that having secured a good quality tenant it is then only right that they continue to receive some benefit following the landlord’s re-letting.
The opposing view, which is held by many landlords is that “Why should a letting agent who has no part in the re-letting process and subsequent management of the tenancy receive any financial reward for letting when they are no longer involved?”
The jury is still out on this case, but just as the case involving bank charges has rumbled on then the same seems likely to be the case with letting agent renewal fees.
Five questions to ask your prospective letting agent.
Landlords looking to employ a letting agent should ask the following five questions before picking one:
1. How do they market their letting properties?
Firstly a landllord should evaluate how the letting agent would market their property. Most letting agents will have their own website. However, that in itself will probably not be enough unless it is well optimised. Try typing in ‘property to rent’ in the location of your buy-to-let property. If the website shows up first or second page on Google then the website is probably worth it. However, really the letting agent should have their properties uploaded onto as many of the large property portfolios such as Rightmove, Zoopla, Findaproperty, Globrix as possible. Does the letting agent advertise in the local press? This is key for many provincial towns and cities where the local paper produces a weekly guide to properties for rent.
2. Can I see the contract?
It seems obvious. But it’s amazing how many landlords don’t bother looking at the letting agency’s contract and terms and conditions. It is not unheard of that some letting agencies do not give out a letting contract at all, and business is contracted verbally. This is potentially a huge mistake as there is no standard terms and conditions attached to letting agent contracts. Therefore every letting agents terms will be different. The agreement should set out clearly the most important thing in the agreement: the fees, and the roles and responsibility of the letting agent. For instance will the letting agent carry out the handover and check out and prepare the inventory?
In light of the Foxtons case landlords need to look carefully at the detail of the contract. Many letting agents could still try and bury the unsavoury conditions relating to letting renewal fees in the nether reaches of the contract, so make sure you read them carefully.
3. How is the tenancy deposit protected?
There have been several recent cases where landlords have lost their tenants deposit because their letting agent has gone bust. Even where the tenancy deposit has been protected by one of the approved insurance based tenancy deposit schemes the landlord still risks losing this deposit. Leaving the landlord potentially liable to the tenant to repay the deposit out of their own monies.
If the letting agent is a member of the Association of Residential Letting Agents (ARLA) the landlord and their tenants deposit monies would be covered by their Client Money Protection Scheme even if the individual letting agent goes bust. Worth considering when choosing a letting agent.
4. How will the letting agent report?
For landlords who have a fully managed arrangement on their rental property, getting a regular update on it is important. So it is worth been clear on the level of reporting the letting agent will provide as part of the service. Will they send you a regular report of the rent and charges. Will they email the details? It’s always important to find out when and how you will be kept informed.
5. Who is responsible for maintenance?
There will be the obvious on going issues over maintenance of your buy-to-let property. If the letting agent is employed on a full management contract then you should agree a scheme of delegated responsibility. Therefore, if any maintenance issues arise then the letting agent will contact you before employing a contractor to go a head with the work. For many landlords a sum of say £100 is a cost that they are comfortable with. Anything more than that the letting agent should contact you to ensure that you want to go ahead with the work and it’s ok to use their chosen contractor. This way it gives the landlord a chance to postpone the work or get somebody in that they know that may be cheaper.
Do I need a letting agent?
Finally, there is always the question of whether; a landlord actually needs a letting agent at all?
There are many websites now available that allow landlords to market their property. Terry Samuels recently highlighted how student landlords can market their buy-to-let property for FREE.
We have also looked in the past at the best FREE letting websites.
As for on going management of their rental property. The issue is invariably time. However, landlords may be surprised how little this is. The initial letting process we have estimated should take no longer than 8 hours.
The ongoing management of the buy-to-let property; unless that of an HMO property where management is more intensive; should take no more than a couple of hours a month. By managing their own buy-to-let property landlords can save thousands of pounds annually in letting agent fees.
Ultimately any landlord will have to make a decision based on their circumstances and what suits their needs.