The ultimate landlord guide to choosing a letting agent

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.

The coronavirus pandemic has further complicated the process, as more restrictions along with health and safety measures have been introduced to protect all those involved. But the pandemic has also forced letting agents to up their game, with many rising to the challenges they have faced, accelerating innovation in the sector, as highlighted in the Property Redress Scheme’s recent back to work letting agent survey.

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.

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Is using a letting agent right for you?

The lettings market in the UK has been increasing in complexity for some time, resulting in an ever mounting workload for self-managed landlords. And now the coronavirus pandemic has unleashed an unexpected curve-ball, causing added disruption to an already turbulent private rented sector.

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 to help them let out their property in a post-COVID world.

You may want to consider using a letting agent if:

  • You don’t have much spare time
  • You’d prefer not to have to deal with tenants’ queries and would rather have an intermediary barrier between you and your tenants
  • Your rental property is in a different area from where you live
  • You’re new to being a landlord and are not familiar with private rented sector legislation
  • You want to reduce stress and prefer to have the peace of mind that the agent will deal with things if something goes wrong

The ultimate landlord guide to choosing a letting agent

You might consider managing your property yourself if:

  • You really want to keep your costs down to maximise your returns
  • You want to be a hands on landlord and have the time to deal with tenants’ queries and any problems that crop up during the tenancy
  • You live in the same area as your rental property
  • You know a network of reliable professionals, such as plumbers and electricians, that you can call upon to help with any issues
  • You are an experienced landlord or you keep abreast of the regulations that apply to the private rented sector

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.

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What questions should landlords be asking when choosing a letting agent?

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:

 

1. Decide what level of service you’re looking for: tenant-find only, rent collection or full property management?

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.

The ultimate landlord guide to choosing a letting agent

Paul Shamplina, Founder of Landlord Action and Brand Ambassador to Hamilton Fraser, 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.

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2. Don’t choose an agent just because they are the cheapest, but do ask about fees and check what agents are offering for their fee

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.

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3. Check that the agent complies with legal requirements – membership of a property redress scheme, client money protection and deposit protection

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.

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4. Find out how the agent ensures compliance with private rented sector legislation

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 this year 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.

Since the coronavirus pandemic, the Government has issued additional new legislation and guidance for renting due to COVID-19.

We provide more information on this for landlords in our guide, Coronavirus: everything landlords need to know, which is constantly being updated to reflect the latest changes. Ask your agent how they have adapted their practices and how the pandemic has impacted their business.

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.