It’s estimated that there are over 10,000 letting agents in the UK. Some are large ‘corporate’ companies who own thousands of agents; some are independent with just one office while others are franchised, such as Belvoir where the individual owners are supported by a central office.
By law, since October 2014, lettings agents in England must belong to a redress scheme, while although agents in Scotland, Wales and Northern Ireland don’t need to belong by law, as yet, many have already joined. Scotish landlords and agents are eligible to join the Landlord Accreditation Scotland voluntarily. However, under part 8 of the Anti Social Behaviour (Scotland) Act 2004 Landlords are required to be Licenced by the local authority in which their property or properties are located and therefore need a landlord registration number. Lettings Agents also require an agents Licence and registration number to operate.
From much of the marketing you would see, it does appear that on the surface, most letting agents are the same. Most, for example, offer the same three services: let only whereby they just find you the tenant and you do the rest; let and rent collection whereby the agent checks the tenant in and collects the rent and finally full management where they look after your tenant and property on-going. However, just because they all offer the same services, it doesn’t mean they deliver them in the same way or work to the same standard.
Do they offer a buy-to-let service?
As a landlord, there are various services you may need which are above and beyond the ‘standard’ offered by most agents. For example, some offer a successful ‘buy to let service’. This is where the agent helps landlords find the right property to let, at a price you can afford, delivering levels of rent achievable in the local area. You could do this through property investment clubs but they tend to charge you thousands of pounds to ‘source’ a property and don’t always offer the discount claimed, nor is it always possible to achieve the rent they suggest. A local agent who offers a buy-to-let service based on their extensive knowledge of the area, won’t charge thousands of pounds and their main aim is to secure your property management business over the next 15-20 years, so your success is very much tied into theirs.
How does the letting agent charge?
Secondly the way letting agents charge is very different. The better agents provide both tenants and landlords with all the fees they are likely to charge. Since Wednesday 27 May 2015 in England it is a requirement to display all fees upfront to landlords and tenants – but not all agents do. In Scotland, letting agents (and landlords) are banned from charging tenants fees, although again, some still do.
Letting agents do charge for their services in different ways, so it isn’t always easy to compare them. What’s important is to be clear on how they charge, not just at the start of the tenancy, but to manage and re-let the property too. Some agents charge landlords a fixed ‘admin’ set up fee, which may include just marketing the property and showing tenants around or include lettings basics such as a tenancy agreement, an inventory and protecting the tenant’s deposit. Other agents don’t charge a set-up fee, but charge a set commission based on the rent to find a tenant or for full management.
Where agents charges become complex and potentially quite high are inflated prices for ‘additional charges’ and carrying out repairs. For example, I find many letting agents who charge low commission fees to ‘attract’ landlords, such as 5% of the rent, in my view, charge high costs for letting incidentals. For example they may charge a set-up fee, a low commission rate and then charge high prices for individual services needed such as a tenancy agreement, gas safety, EPCs, protecting the tenant’s deposit, inventories, tenancy renewals and more.
With the latest news that Foxtons charged one landlord £616 for a job which had actually cost £412.50, nearly a 50% increase, many have assumed all agents do this and it is extremely important to be aware that many don’t. At Belvoir, although it varies by franchise owner, many will organise repairs up to £500 free of charge, over and above this, there wouldn’t be more than 10% charge for organising the work and this would be agreed upfront with you first.
For you to compare costs on a ‘like for like’ basis, it is important to compare letting fees over a 12 month period:-
What does the ‘set up’ fee include? What percentage uplift does the agent charge for individual services? How much will the agent charge for management, renewal and check in/check out fees? What will it cost to organise repairs? Do they organise some repairs for free?
Does the letting agent keep up with latest legal changes?
The final main difference between good agents and the not so good comes from keeping up with legal legislation for lettings.
Successive governments have been increasing the amount of legislation which affects landlords, letting agents and rented properties. The legislation varies from Scotland to Northern Ireland and although England and Wales are currently similar, Wales is about to make changes which will mean its letting legislation will be quite different.
To keep up with these legal changes requires substantial investment from letting agents. This is why many letting agents don’t bother. To keep up with legal changes, agents need to belong to an industry organisation such as the Association of Residential Letting Agents (ARLA); Safeagent Scheme (Safeagent) or the Royal Institution of Chartered Surveyors (RICS). These organisations require the highest standards in lettings. For example, they need their agents to have ‘client money protection’ insurance which means if something goes wrong with the business, the rent collected by the agent is protected. It also means every time there are proposed changes to the law, the agent can respond; it’s not just knowing the law that’s important – it’s being able to interpret it correctly on your behalf.
Don’t just go with the cheapest agent
So, although on the surface, agents do offer the same services, there are key differences, especially when it comes to standards and pricing. Firstly find out whether they offer a buy to let service or just let your property; secondly check they are upfront with their charges – you shouldn’t have any surprises, or heavily inflated bills; thirdly good agents will have client money protection which insures your rent and finally the best agents make sure you and your property are always let legally.
