The market for renting out residential property has dramatically expanded in recent years with the very strong growth of buy-to-let and the increasing popularity of rental property as a long term investment. According to the Office of National Statistics, 36% of households in England and Wales were rented rather than owner-occupied in 2013.
Most landlords will appoint an agent to handle the rental and the choice is extensive. There are considerable numbers of letting agents and the majority of estate agencies operate letting divisions. Given that the agent will be responsible for important long-term financial and legal matters, it is absolutely vital to choose the right one as letting agents are unregulated and there is no statutory standard for service or for fees.
1. Letting agent location
It makes sense to use a letting agent that is located in the same area as the rental property. Most towns have a number of firms who are letting specialists and many estate agencies have letting divisions. Some landlords prefer to use agents who are members of a trade or professional body such as ARLA (The Association of Residential Letting Agents) or NALS (National Approved Letting Scheme) because they should be following codes of professional conduct and have proper guarantees in place to protect landlord and tenant monies.
2. Choose the service level
Most letting agents offer three levels of service. Tenant-find only means that the landlord will be undertaking the day-to-day management of the letting. Tenant find + rent collection means the agent will find the tenant and collect the rent but all other matters will be dealt with by the landlord. Full Management means the agent takes care of everything to do with the letting from start to finish and will only involve the landlord if something out of the ordinary needs their decision. For new or less experienced landlords, full management is often the service level of choice for peace of mind.
A competent and professional letting agency will handle all the paperwork involved in a letting. They will take up references on new tenants, carry out credit-checks, confirm the tenant’s employment details and check that the tenant has the right to reside in the UK. The agent will draw up the tenancy agreement and collate the required gas and electrical safety certificates. Agents can also obtain an Energy Performance Certificate (EPC) for the property. This must be given to any prospective tenant.
4. Marketing, advertising and rent
A property without a tenant will cost you money, so make sure the letting agent will be very pro-active in finding a good tenant as soon as possible after they are instructed. Ask the agent which local papers they advertise in. Check that they are listing properties on a main internet portal such as OnTheMarket.com. Find out if they already have tenants on their books who will be interested in the property. To get you the best return, letting agents will advise on what level of rent can be expected for a property and will be able to show you details of similar properties that have let for a similar figure.
5. Client Money Protection
Letting agents handle deposits, rents and maintenance monies. Landlords and tenants need to be certain that the money is safe and that no-one can run off with it. A reputable and professional letting agency will be able to demonstrate that it belongs to a Client Money Protection scheme. In the extremely rare event of a fraud, the landlord and tenant will be reimbursed for any loss. All landlord and tenant money should be held in a Client Account, separate from the letting agent’s general bank account. Ask for confirmation that this exists.
6. Complying with deposit law
If you choose the tenant find + rent collection or the full management service from an agent, they should be able to deal with matters concerning the security deposit that is paid by the tenant at the start of the tenancy. This money, which is usually equivalent to 6 or 8 weeks’ rent, is held by the agent on behalf of the landlord as a safeguard against the tenant causing damage to the property. By law, such deposits must be registered with a government approved tenancy deposit scheme. Ask the agent for details of the scheme they use and for confirmation that the deposit has been registered.
7. Safety legislation
There are a number of pieces of legislation in place to protect the safety of tenants. Ask the letting agent to ensure that the property is in compliance with the rules. In particular, a property with a gas supply must have an annual maintenance check and a Gas Safety Certificate must be provided by a qualified gas engineer. Most agents can make the arrangements. If electrical items are provided by the landlord, they must be safety tested by an electrical engineer. Again, the letting agent should be able to deal with the matter. Any soft furnishings at the property must comply with Fire Safety regulations. Professional letting agents will advise on compliance. Whilst good letting agents will handle these matters, the legal responsibility remains with the landlord.
8. Repairs and maintenance
Every property needs looking after. Ask the letting agent if they carry out regular inspections to ensure the tenant is keeping the place in good order and to check if there are any maintenance issues. Letting agents usually have a panel of trades people who can be called upon to make repairs, maintain gardens and carry out annual tasks such as clearing gutters.
9. Maintenance float
If a letting agent is managing the property during a tenancy, it is usual for them to have the authority to carry out necessary repairs up to a certain value without reference to the landlord. This will be for such things as a leaking tap or a slipped tile on a roof. The landlord will keep a sum of money with the agent as a “float” and the agent will account for the money as it is spent.
10. Letting agent fees
At the time of instruction, the letting agent will ask the landlord to sign a document that details the fees that are payable for the services provided by the agency. Before signing, landlords should carefully read the document and ensure that they agree with all the possible charges. Be clear about all possible charges for renewal of an existing tenancy, charges that may be payable if the property were eventually sold to a tenant, charges for termination of the agency and the wide variety of charges for such things as advertising, inventory preparation, periodic inspections and so forth.
11. Accounting to the landlord
Check with the letting agent the arrangements that they have for accounting to you for the rent received, costs, and charges and how often they will transfer balances to your account.