If you are considering investing in a buy-to-let property and becoming a landlord, you will essentially have three options when it comes to finding tenants and property management. You can either do the work yourself, hire a managing agent to provide some of the services and do the rest yourself, or hire a letting agent to provide a full management service. For this reason, many landlords pose the question: is it worth using a letting agent?
Hiring a letting agent is absolutely worth it if you do not have time to manage your buy-to-let property, or if you lack experience as a landlord. Letting agents assist private landlords with meeting their legal responsibilities and provide services for viewings, repairs, rent collection and more.
I have met several landlords who have grown their property portfolios over a number of years. Most started investing in property whilst they were working full time, and they hired letting agents to assist with finding suitable tenants and managing their property on a day-to-day basis.
Once their portfolio had grown to a size that brought their letting agents fees to an equivalent, or larger amount, to what they earned through their employment, they made the decision to stop using a letting agent and manage their portfolio themselves.
Their decision was not just about the money. They first felt that they had gained the experience over the years whilst working with letting agents, to be able to take on the role themselves. And secondly, they knew they would also be swapping one job for another.
Managing their own portfolios had many benefits. Some felt they could provide a better service than the one they were receiving. Some preferred the flexibility of being able to work for themselves and manage their own time. And ALL recognised that they had the option to offer their new service to other local landlords, if they wanted to grow their property management business.
Owning a buy-to-let property is a business. Whether your intention is to actively invest for rental income, or whether you want to invest for a pension fund in the future, you will have legal requirements that you must adhere to and customers that you will need to serve.
With that in mind, I would always recommend to people investing in the private rented sector for the first time, to utilise the services of a good letting agent, irrespective of how much free time they may or may not have.
What Is A Letting Agent Responsible For?
A letting agent is responsible for ensuring that the landlord is compliant prior to advertising their buy-to-let property on the open market. Once the property is occupied, they may be responsible to both the tenant and landlord dependant on the management service the landlord has selected.
Letting agents will have experience with marketing properties for let, finding suitable tenants and conducting background checks, providing legally binding tenancy agreements, overseeing the ‘move in’ procedure, rent collection and repairs and maintenance.
Although letting agents have a responsibility to ensure landlords are compliant, it’s important for me to point out that the overall responsibilities rest with the landlord. The landlord will always be held accountable if something goes wrong. But please don’t let this put you off. During the many years I have been a landlord, I have found the support and services of all letting agents to be more than sufficient to meet the requirements.
If you would like to learn more, you can read my article on the legal responsibilities of a landlord in the private rented sector.
What Management Services Do Letting Agents Provide?
There are 3 main services that letting agents provide and each can often be tailored to suit the needs of the landlord:
This will include marketing your buy-to-let property on the open market through online platforms like rightmove.co.uk and zoopla.co.uk, arranging and conducting property viewings, conducting background checks and right to rent checks, and producing a legally binding tenancy agreement.
This is an ideal service if you do not have the time or skills to market your property and conduct viewings. Or perhaps you feel uncomfortable with selling to people you have not previously met. A good letting agent will be able to sell your property to potential tenants by highlighting the qualities and benefits of your property and the location.
A letting agent may also ask if you would like some additional services added to their tenant find service. For example, an inventory and tenant deposit protection.
You will be charged a one time fee for a Tenant Find service which will typically be the equivalent of 3 to 6 weeks rent. The amount you will be charged can vary significantly, so it is worth shopping around and deciding whether there are parts of the service you would prefer to complete yourself.
Part Management Service
This service will include all the features and optional extras of the Tenant Find package, plus rent collection on a monthly basis and the chasing of late payments. Letting agents will also advise the landlord on any courses of action they can take if rent payments are missed or if there are any other issues with the property.
A Part Management Service will likely include a set up fee and a monthly management fee. The set up fee should be lower than the one off Tenant Find fee, and you can expect the monthly management fee to be between 5% and 10%.
Negotiation is the key here. Perhaps you would prefer to pay a higher set up fee and reduce your monthly expenses, or perhaps you would like to spread your costs over the duration of the management period. Talk to the letting agents and let them know your preference and they will do their best to accommodate you (pun intended).
Full Management Service
You guessed it! This service will include everything from the Tenant Find package and the Part Management Service.
Property investors who do not have the time for property management, or who prefer the armchair approach, will opt for the full management service. This is the service I used when I purchased my first buy-to-let property whilst I was in full time employment.
Looking back, it felt like a ‘set and forget’ approach.I felt relaxed knowing that the letting agent would take care of any issues and problems that may arise, and I would be free to focus on my work and family time.
A Full Management Service will also include areas that can be tailored. For example, you may agree that any repairs needed below £200 are carried out without prior approval from yourself, and repairs exceeding £200 would require your consultation to discuss the options available. If the shower unity needs replacing, you may prefer to be involved with the selection and fitting of the unit.
Fees for the Full Management Service will typically include a set up fee and a monthly management fee between 10% and 15%. Again, negotiation is key. Talk to the letting agents and let them know your preferred approach to management costs.
Can You Let Your Property Without A Letting Agent?
Yes, you can most definitely let your property without a letting agent. If you have the time and the knowledge to meet your legal obligations as a landlord within the private rented sector, you can self manage your buy-to-let property.
Hiring a letting agent isn’t the rule, if anything – it’s the exception to to the rule.
Since the Tenant Fees Act was introduced on 1st June 2019, the costs for landlords who use high street lettings agents has increased significantly. All charges previously paid by the tenants have now been passed to the landlord.
Personally, I see this as a good thing. I have heard stories in the past of letting agents charging astronomical fees to potential tenants, and something needed to be done in my opinion. The landlord is the business owner and not the tenant. So it makes perfect sense to me that it should be the landlord who negotiates with the letting agents regarding fees, on a business to business basis.
Have rents increased since landlords have absorbed the fees that tenants previously paid? In some areas yes, and in other areas no. The introduction of new legislation isn’t the only cause of rent increases, there are many other factors that can have an impact on the market so instances like this are always difficult to measure.
The online letting agent industry appears to be booming as a result of the Tenant Fees Act. Online letting agent services have been available for a number of years now, and I have recently used their services for the first time. I have been very pleased with the service they have provide, the features I can use and the fees that they charge.
If you haven’t already, I would recommend taking the time to consider using an online letting agent. You can read about my experience with using an online letting agent and why I am happy to recommend them to my family and friends.
Can A Landlord Change Their Letting Agent?
Yes, you can change your letting agent whenever you want.
It doesn’t necessarily have to be at the end of a tenancy – you can change your letting agent even during a tenancy. Although you will have signed a contract with your agent so you will need to check the notice period that is required.
Once you choose your new letting agent, you’ll send a formal notice to your current letting agent, and give each of them one another’s contact information. Your new letting agent will usually take care of the transition on your behalf.
Your new letting agent will also contact the tenant(s) and explain the situation. The new letting agent will then ensure that the tenant contacts them in the event of any maintenance issues, payment issues, or anything else involving the letting agent’s responsibility.
The new letting agent will also obtain all the legal documents and process them as needed. This includes the tenancy agreement, referencing reports, deposit details, and check-in inventory. They will also obtain all the necessary property documents including warranties and safety certificates. They’ll also check the property for compliance with the current safety regulations.
The new letting agent will collect keys and arrange a property inspection.
Changing your letting agent isn’t that much of a hassle, as the largest portion of the job is carried out by the new letting agent themselves. You can change your letting agent whenever you like.
Can A Letting Agent See Your Credit Score?
Letting agents cannot see either a landlords, or tenants credit score. This information isn’t public, and they can only see it if you provide it to them. This is completely normal and it will remain that way to protect your financial privacy.
A lot of letting agents may ask a tenant to provide them with their credit score, and this is only to check if they have had any issues paying their rent or bills in the past.
There are two important pieces of information that letting agents will take a look at, however. And those are your electoral roll status and county court records.
Your court information is important so you can prove to your letting agent that there aren’t any county court judgments against you (which basically means that you aren’t in debt to anyone). They also want to check for insolvencies in your name. This to make sure that potential tenants are valid and that there won’t be any trouble with paying the rent or associated monthly bills.
Secondly, a letting agent will want to check a tenants electoral roll listing. The reason they do this is to confirm that the address they have provided is the one they are currently residing at. Tenants should take the time to ensure that they are registered to vote and that it’s properly recorded and documented on their credit report. Tenants who face any issues doing this, can simply contact their local council’s Electoral Registration Office.
Tenants are advised to check all this information before they apply, because most letting agents will require this information in the application. And if something’s wrong, unbeknownst to them, they may automatically get rejected, even though a simple misunderstanding may be at play.
Occasional missed payments or lack of credit history isn’t something that your letting agent will find once they do a background search on you. Your credit score is for your eyes only, and it can’t be checked by the letting agent without you knowing.
Who Can I Report A Letting Agent To?
Letting agents are required to be a member of either The Property Ombudsman or the Property Redress Scheme. Both landlords and tenants have the right to raise a complaint if they are not happy with the level of service they are receiving from their letting agent.
You should send your complaint to your letting agent first, and if you’re the tenant, then send it for your landlord first. You can do this through the company’s internal complaint procedure. If you don’t feel comfortable discussing your grievances on the phone or in person, you can contact your letting agent via email.
The thing is – most complaints can easily be handled and compromises can be reached, so if you need your letting agent to change the way they work, the best thing to do is to let them know that you’re not happy.
Sending your complaint to a higher authority before giving your letting agent a chance to fix the problem is counterproductive and will only escalate the situation. Give your agent time to respond, and only if they haven’t responded, or you’re not satisfied with their response, should you then contact a higher authority.
If it’s come to that, you should forward your complaint to The Property Ombudsman or the Property Redress Scheme, which exist solely as an intermediary between landlords and letting agents. It’s likely that your issue will now be solved, but if it isn’t, then you should forward your complaint to Propertymark, if your agent is ARLA Propertymark Protected.
If you’re convinced that your agent is behaving illegally, then you should contact Trading Standards. If there are any health and safety issues with your property and the way it’s being managed, you should also notify your local authority.