If you’re entering the buy-to-let property market, avoid being ripped off with this checklist of essential considerations when choosing a letting agent to both find you a tenant and manage your property.
We’ve all heard stories about letting agents leaving tenants high and dry, but letting property isn’t smooth sailing for landlords either. These tips will help you ask the right questions so that you can pick the best agent or company for your needs.
1. Insist on clarity over the letting agent’s fee
Find out exactly what the fees are before you deal with them. Agency fees for finding a tenant are paid in advance, and are typically around eight per cent of rental income, though some agents can charge considerably more. Ensure you’re clear on this. If the agent is evasive about their charges or are too expensive, walk away and select another agent.
2. Negotiate a fee discount for multiple properties
Check if the agent is open to discounts if you are letting more than one property through them. If you have several properties you should be able to negotiate a discount from the standard rate. If you only have one, you may still be able to get discounts by clubbing together with other landlords.
3. Do not pay renewal fees
Some agents will also seek to charge an annual renewal fee, on the anniversary of tenancy agreement, often at the same level as the previous year’s fees. But it’s effectively charging again for finding the tenant when the agent has done nothing. Even if the agent had a role in negotiating the terms of a renewal, rent increase and preparing the tenancy agreement, is this work really worth eight or nine per cent of the annual rent?
4. Pay no more than one year’s fees in advance
Make it clear that you will pay only one year’s fees in advance. Some agents will claim the that the tenant insists on two or three-year tenancies and demand their fees in full in advance, but there’s a risk the tenant will leave before the end of the tenancy, so you should never pay more than a year’s fee in advance.
5. Only use a member of a professional body
Whether you’re a tenant or landlord, choose a letting agent that is a member of any of the recognised professional bodies, such as the Association of Residential Letting Agents (ARLA), Residential Landlords Association (RLA) and National Approved Letting Scheme (NALS).
They should also be members of The Property Ombudsman’s (TPO) scheme, which is the industry’s consumer redress scheme.
6. Check their professional insurance
Ask the agent you are considering using if they have professional indemnity insurance and client money protection (CMP). They should also use one of the official tenant deposit protection schemes.
7. Don’t pay a mark-up on services such as cleaning
Check for mark-ups on the services provided through the letting agent. Many agents mark up costs by as much as 300 per cent for work such as tenant referencing, cleaning, inventory and setting up the tenancy agreement. To avoid this, get a clear pricing of these services beforehand, and insist on seeing invoices from all contractors, and from credit referencing agencies.
8. Get sight of all contractors’ invoices
When it comes to managing your property, your instructed agent can overcharge by marking up contractors’ invoices for repair and maintenance work, such as changing a tap or fixing a toilet. As a prerequisite in selecting an agent, insist on seeing all invoices.
9. Don’t let them take backhanders from contractors
Moreover, as highlighted by the class action currently being taken against Foxtons, agents abuse their position of trust and take hidden or secret commissions (backhanders) from the contractors they engage. Ask the agent to expressly agree not to do this in their T&Cs, and walk away if they won’t agree to do so.
10. Meet the tenant yourself
To avoid the risk of letting your property to the wrong sort of tenant, don’t just rely on the letting agent. Meet the tenant yourself to get a feel for whether you trust them with one of your most valuable investments. If possible, it’s a good idea to insist on seeing copies of some of the referencing documents as well. Also ask the tenant if they’re happy with the service provided by the letting agent. If they feel they’ve been ripped off, the same will probably be happening to you.
Jonathan Monjack is CEO of The Happy Tenant Company