(Spoiler Alert- Some Do, Some Don’t)
What do letting agents do anyhow? The duties of a letting agency vary depending on how much work landlords will do themselves.
The most basic tasks of a letting agent are to find the right tenant for the most suitable property, and to value the property to determine the amount of rent to charge.
Valuations are invariably carried out for free, and once the landlord and letting agency has agreed a commission for the services expected, the agency advertises the property.
Well, it’s rarely that simple.
Sometimes, running a letting agency is a thankless task.
The problem appears to stem from there being no legal obligation to belong to any regulatory body (the main one being ‘The Association of Residential Letting Agents’ or ‘ARLA’). Anyone with the inclination and money can start a letting agency, without qualifications or experience-and some do.
Reputable letting agencies tend to opt into the ARLA to stand out from those that don’t. The difficulty is that unless the public is aware of the organisation and what it does, nothing much will be gained from it and to be a member is not cheap at £230 per annum per member.
However, once enrolled a letting agency must adhere to strict regulations and incorporate a comprehensive complaints procedure for the clients on their portfolio. An agency must also join the Ombudsman, CMP (Client Money Protection membership scheme which is law from April 2019), and Tenant Deposit Schemes.
Agencies need to educate the public about why they should choose an affiliated member over one that isn’t.
Letting agencies are considered lucrative businesses, but this is only part of the story.
*The living Room agency using Sorbet
Consider just some of the tasks of a typical letting agency.
We’ve concentrated on those companies that offer complete property management;
- Constant phone calls from landlords, enquiries, tenants and tradespeople, plus banks and bill paying.
- Constant emailing to and fro, to keep everyone in the ‘loop’ and to chronicle what work is being carried out.
- Showing properties to potential tenants who may or may not turn up and when they do are often late, or it’s a waste of time.
- Checking out the guarantors given for a tenant.
- Checking for fraudulent money laundering practices.
- Taking inventory of the properties and photos before and after occupancy.
- Arranging repairs for a whole host of tradespeople and checking the work is completed satisfactorily and safely.
- Signing the correct papers (often in triplicate or more) for all manner of documents.
- Ensuring rents are paid correctly and on time.
- Forwarding relevant certificates to the appropriate people (tenants, landlords, bodies)
- Dealing with all manner of issues, both in and outside of regular office hours.
- Arranging check-outs for tenants and returning of keys.
- Dealing with returns of deposits and disputes that often arise from them.
- Ensuring compliance with around fourteen pieces of legislation -for a standard type of let, aside from those within the voluntary schemes.
With all these tasks and more, it’s easy to see why some letting agents are not doing as good a job as they could.
Moreover, with new government legislation preventing agencies from taking a finder’s fee from the tenant, many will struggle initially and probably pass on the costs to the landlord (The landlord almost certainly passing this on again to the tenant!),
If an agency is well organised, and there are many properties on their books the return on investment can be rewarding but establishing a popular and profitable business demands long hours and lots of work.
According to research carried out by Statista.com, the average UK rent is around £680 a month (though this rises dramatically in London and the South-East).
The average fee charged by a letting agency for entry-level services is around ten percent of monthly rental costs. Services involve advertising for and sourcing a tenant, drawing up agreements, taking deposits and the first month’s rent.
It follows that if all an agency has is entry-level contracts, they would need around 150 rental properties for a turnover of around £100,000.
£100,000 may sound a lot, but with today’s overheads, it doesn’t leave much for staff salaries and profit.
Once established, it’s not all plain sailing the agencies either.
Dealing with irate landlords, tenants with broken down washing machines or arranging a repair on a blocked toilet is not everyone’s ideal choice of work.
Problems with tradespeople, sorting out lost keys, learning tenants have run off without paying or wrecked property, and you begin to wonder why so many agencies exist!
There’s seldom a day when there isn’t an issue at a successful letting agency. However, it’s the varied duties that can also attract some people to this type of business.
Some people relish inventory and invoicing organisation, problem-solving, arranging deposits and rent payments, property inspections and all that goes with it.
The problems faced by an agency increases in line with the services they offer and taking over the responsibilities of full property management brings its pitfalls.
Here are some common problems a letting agency faces when operating a full management service and some tips on how to handle them.
Common Problems Faced by Letting Agents:
Tenant late with rent
There are many reasons for a tenant either refusing or unable to pay rent.
The tenant may be ill or suddenly unemployed; they might be disputing some maintenance issues, or merely taking advantage of their position.
Whatever the problem, communication is key and ability from the agency to understand the problem and negotiate a satisfactory outcome.
Tip: Look from the offset to structure payment options.
Thankfully, with most tenants, a shortfall in rental payment is a temporary concern. It’s common for tenants to struggle with their finances at times, so perhaps set up a method of paying arrears over the coming year.
An alternative would be to add the amounts owed to a weekly or monthly rental agreement to spread the debt into more affordable chunks.
Communication is crucial, and awareness of the financial problems a tenant faces and acting upon them before they get out of hand is by far and away the best option.
The tenant can’t afford the rent
If it’s the case that the tenant’s circumstances have changed to a point where they can’t afford to pay the amount agreed for rent any longer, perhaps the landlord and tenant can renegotiate the contract, or decide on a shared occupancy?
Sadly, there comes a time when it’s inevitable that a tenant must leave the property because of their inability to pay.
Being able to convince a tenant it’s preferable for all concerned that they leave the property voluntarily and not via a long and drawn out process is an art.
An impending eviction notice will hurt their credit and future chances of renting again and may see them in further debt later.
When all else fails, it’s important that the tenant is aware of their obligations.
Tenant withholding rent due to a repair
If a tenant refuses to pay due to an issue with a repair, it’s vital to establish an acceptable and reasonable resolution for both landlord and tenant and a timeframe for any work to be carried out.
The tenant should be informed as diplomatically as possible given the situation, that by law they have no legal right to withhold rent due.
A clear system for repairs and maintenance will help with avoiding this predicament.The system should resemble something like this;
The tenant informs the agency of the repair required and follows this up in writing allowing a reasonable time for the necessary works to be completed. The amount of time deemed ‘reasonable’, will depend on the urgency of the repair and it follows that any danger to the residents is considered.
If the repair is not carried out within a reasonable period, the tenant has the legal right to carry out a repair themselves. The tenant informs the management agency (in written form is best) or landlord that they will complete the repair themselves unless the work is completed by another set time.
If the work is still not completed, the tenant should obtain three estimates and send copies to the landlord or letting management agency (or both), offering a final opportunity to carry out the work.
If no agreement can be reached, the tradesperson with the lowest quote should be engaged to complete the work.
The tenant must keep a copy of the invoice, pay the contractor and seek reimbursement for the cost from the landlord. If the landlord doesn’t repay the tenant, they may deduct the costs of the repair from future rent.
N.B- The option for a tenant to arrange a repair can only be used by those who can afford to pay the contractor, and the process is time-consuming.
There is no reimbursement for inconvenience, time lost, and possible stress involved in the process. The tenant may be held liable for a shoddy repair, and council tenants do not have this right, nor those claiming universal credit.
Dealing with disruptive tenants
While a screening process may weed out most unwanted tenants, it can’t stop disruption from arguments that may occur in the future.
Undue noise and anti-social behaviour is a constant factor with many properties, so it’s vital to include clauses in any tenancy agreements that deal with these issues.
Tip: Include a clause in the tenancy agreement that advises tenants attempt to peacefully resolve neighbour problems without intervention from either the landlord or letting management agency.
A simple statement declaring at least one of the parties in conflict may not be pleased with a solution may go some way in resolving whatever issues there are.
A polite reminder to adhere to the terms of the tenancy contract is often all that’s needed.
When all else fails, it may be an idea to suggest mediation services as a means of settling a disagreement.
Though this service is best carried out by professionals, letting agencies have been known to act as mediators.
The local Citizens Advice Bureau often offer this service, but fees for this are usually applied and vary throughout the UK.
A tenancy agreement will typically include property regulations to indicate how they deal with the most common disputes.
The property has a poor reputation, making it hard to rent
Sometimes, the reputation linked to property makes it hard to rent.
Rumours of noisy parties, drugs and antisocial behaviour, and a poorly maintained external façade, all play a part in how easy a property is to rent.
Speedy countermeasures are needed by the landlord to alter the property’s poor perception and entice the correct type of tenant.
Tip: A poorly decorated building sends out the wrong message to a tenant.A landlord must invest money and time in remedying the underlying issues. Improvements can include new landscaping, redecorating, and even renaming the building if it has one.
The landlord or letting agency should liaise with the local police department to determine if there are specific occupants that are regularly necessitating callouts and act upon this by evicting the offending tenants.
If police budgets allow, ask if community support officers might patrol the area more frequently for a short term.
When the bad tenants are out, consider a system in which the landlord offers a cash incentive or rent credit for quality referrals that lead to occupying the empty flats or rooms.The strategy of asking the tenants for help will encourage a better quality occupancy as it gives the tenant an opportunity to find someone compatible with them. Once you’ve achieved cleaning up the place, it’s time to advertise.
Spreading positive news around your local area will show the landlord as being proactive in the community.The letting agents should announce and highlight the changes made as this is both good publicity for the area and the agency themselves.
The property has a high turnover rate of tenancy
The most common underlying cause of a high turnover of tenure is a poorly maintained building.
Tip: It’s vital to ensure that an agency keeps a finger on the pulse when it comes to repairing issues.
Maintenance requests should be dealt with professionally and as quickly as possible to establish a good working relationship with the tenants of the property.
Implement a system which allows for a monthly notice where a tenant can outline any remedial work that is necessary, with relevant phone numbers and email address for ease of contact.
There is an issue with pests
Being a nation of supposed dog lovers, it’s hard to believe some people think of them as pests, but try living next to a constantly barking or aggressive dog and perhaps you may have a different view.
Dogs are a primary cause for neighbouring disputes.
If the tenant is allowed to keep pets in their home, invariably they will have a duty of care, not only by their tenancy clause, but by the law of the land.
It’s not unknown for landlords to successfully evict a tenant due to their reluctance or inability to look after their pets.
Dogs aren’t the only cause of disruption. Cats, parrots and other exotic animals can be the subject of complaints. Without the relevant permission, animals may not be permitted and tenants could be forced to remove them.
Every tenant should have the right to their own peace and quiet and noise, or health and safety issues can bring major disruption and even promote violent confrontations.
Unhealthy environments caused by irresponsible tenancies must also be examined.
No one wants to share their home with rats, mice, or cockroaches. Sometimes, the cause may not directly arise from the building you manage, rather a neighbouring one.
Wherever the origin stems from the root cause must be investigated, and appropriate action is taken quickly before public health and safety become an even bigger issue, (and the landlord is forced to rehouse the tenants while dealing with the infestation).There is an issue with leaks Water leaks lead to mould, rising damp, wet and dry rot.
Neglected leaks will soon cause untold significant damage to any property.
It’s vital that leaks are repaired quickly and adequately before the property needs expensive repairs.
Tip:If a tenant informs the property management agency about a leak, have it investigated immediately as some tenants will not easily clarify the seriousness of the problem.
Tenants have a right to a safe home, and the longer a leak is left unchecked, the more likely the damage and subsequent repercussions later.
There is an issue with broken appliances
Tenancy agreements will stipulate if the property is furnished or unfurnished and the inventory will include all of the items.
If the agreement shows the landlord is responsible for the upkeep of the appliances, the onus is upon them and therefore their managing letting agents repair or replace a faulty machine.
Similarly, if a new tenant occupies a property and discovers that appliances are listed but missing, they must be supplied as soon as possible.
Organisation and communication are the keys to managing properties efficiently, both of which are rare traits in most businesses.
Letting agencies need operating systems that work and are logical to follow, alongside clearly defined communication processes that their tenants, staff and tradespeople can understand.
What are your experiences as a letting agency?
What do you think could be done to improve a letting agencies’ reputation?
Do you have any views or points you think we’ve not touched upon?
We’d love to hear from you and share your feedback