Today, in our series of “Frequently Asked Questions”, we look at the pros and cons of using the services of letting agents to handle the ongoing management of their properties. These companies are also known as “property management companies” but in this article we’ll refer to them as the more commonly used term; letting agents.
Some landlords are happy to manage their own properties and everything that it entails whilst others, especially those with multiple properties, prefer to outsource this responsibility to the letting agent.
Although it may not be obvious at first glance, there are actually a few different types of letting agents.
First there are the small independent ones who cover a smaller area but have a good reputation and knowledge of the local area. Their advertising and marketing may be limited due to a smaller pot of resources and knowledge.
Then there are the bigger companies who cover a much larger area through multiple offices; these may be more suited to landlords with multiple properties.
Lastly, there are the franchised letting agents. These are individual businesses who pay a license fee to be part of a bigger group. Franchisees generally have to pay a marketing levy each year to the license holder which goes towards spend on advertising and marketing; helping to further increase their exposure. This is good for landlords as it means there should be more potential tenants. The downside however is that franchisees have higher overheads (as they have to give a percentage of their turnover to the license holder) compared to an independent and these may indirectly mean more costs passed on to the landlord.
Most letting agents these days operate on a ‘no let no fee’ basis which may make it more difficult to pick who to go with. You should contact a few companies so that you can compare what’s on offer. Check out their offices, website and print presence, online and any other marketing exposure. Try not to keep emotion out of the picture and use your common sense. If an agent is hard to get a hold of, doesn’t return your calls, or is rude, the chances are they probably aren’t the right fit for you.
It’s very important to do your research to find out how long the agent has been running for as in this industry experience is extremely valuable. Try to select agents who have experience of dealing with properties similar to yours and in similar areas.
If there’s only one tip we could give it would be this; choose an agent who is a member of a recognised professional association, or at the very least registered with The Property Ombudsman. The Association of Residential Letting Agents (ARLA) is one of the most highly recognised here in the UK.
There are a few reasons on why we would strongly recommend this:
• be bound by a code of practice
• Will be kept up to date with the ever changing legislations
• Will have indemnity insurance in place and comply with any laws relating to safeguarding client money
Generally speaking, letting agents will offer three different levels of services; letting only, letting plus rent collection, full management service.
Letting only is the cheapest and will normally include the agent preparing the property, marketing it, carrying out viewings, checking tenant references and sorting out the tenancy agreements. They may also collect the first month’s rent and deposit and hand over the keys to the property.
With this option the landlord will be responsible for collecting the rent from the tenants directly.
Letting plus rent collection includes the above with the addition of the agent collecting the monthly rent from the tenants before passing it onto you. Check your agreement carefully as some agents will guarantee you receive the rent regardless of whether they are able to collect it from the tenant or not. Similarly, some will guarantee you your rent even if the property is vacant.
Finally there’s the full management service. This includes all of the above. The agent will become the port of call for the tenant and they will handle everything (almost like a PA). They will handle all the day-to-day running and maintenance of the property including things like domestic appliance repairs.
Check your agreement carefully as more and more letting agents these days charge you some sort of extra fees for this. Take a washing machine repair for example; some agents will have their own list of approved repairers to whom they will send the work to. They will then add their commission onto the invoices before passing to you for payment. We would strongly recommend you ask them for quotes in advance and do your own comparisons. Often you can find it cheaper to contact the repairer yourself.
This is another area where you need to check your contract carefully to avoid getting a nasty shock in the future. Some agents, as per their contract, are authorised to carry out repairs up to a certain value without getting prior authorisation from you. Check other things like who is responsible for carrying out electrical, gas and boiler safety checks.
If you’re not happy with your letting agent then you can of course switch to a different company or decide to handle the management yourself. You will most likely have to give them notice and may need to stay with them for a minimum period of time so it’s important you check your contract.