This is a re-write of a post I did six years ago in 2012 – which I have left online as there were many interesting comments.
As I said then, many letting agents are good, some are outstanding, but it has to be said that many others offer a poor service. Which is why the government’s proposals to introduce regulation and mandatory training for letting agents are a good thing.
The problems in the sector will not be solved merely with the Tenant Fee Bill as many are to do with the service which some agents provide to their own clients, their landlords.
Here are a few things they may be keeping quiet about
1. They do not have any relevant qualifications.
The letting agent industry is currently unregulated – apart from the obligation to join a Property Redress Scheme which has been introduced since the original post was written. There is still nothing to stop any Tom, Dick or Harry setting up shop with little experience. Many do.
Landlords paying for a full management service rely on their agent’s expertise to help them navigate the tricky regulations that beset the sector. So it is important that agents are properly trained and know what they are doing.
This problem will hopefully be resolved as and when the government’s plan to regulate the sector comes into force. However, this will not be for some time.
So in the meantime, you should look for an agent which is regulated by ARLA, RICS, or NALS.
2. They are spending your money
Letting agents hold thousands and thousands of pounds of other people’s money. As there is no regulation for the industry, they can keep this where they like. Sometimes it is just put in the firm’s general bank account along with their own money (or more likely, overdraft) and spent on their own expenses.
Thankfully this issue is due to be rectified by the introduction of mandatory Client Money Protection insurance for letting agents which is likely to come into force next year in 2019.
In the meantime, (again) you should use an agent regulated by ARLA or RICS (where client money protection is a condition of membership) or one which has signed up to Safe Agent.
3. They have not referenced your tenant properly
Finding a good tenant is one of the main reasons why people go to an agent. However, when I did eviction work, I often had cases we (ie the landlord and I) discovered the initial referencing had been unsatisfactory. Many other landlords have also complained about this to me.
Indeed as you can see here, one landlord was successful in obtaining £8,000 compensation through the courts after suffering heavy losses due to inadequate referencing.
The problem is exacerbated by the fact that many agents refuse to provide details of any of the referencing material to the landlord, claiming that they are not allowed to under the Data Protection Act. I wrote about this here.
4. They are getting kickbacks from repairmen used for your property repairs
Not all agents do this of course, but it is not unknown for agents to have cosy relationships with tradesman, with the hapless landlord being charged over the odds.
Under agency law, if commission from tradesman or similar income has not been disclosed to the landlord in advance, it is considered to be a ‘secret profit’ and by law, this money belongs to the landlord.
A class action case a few years ago was on this basis but we have not heard anything further so it may have been settled or not gone ahead. I see no reason why similar claims should not be successful though.
5. They are encouraging your tenants to leave at the end of the term so they can charge you for finding a new one
I wrote about this here. That post is pretty old now – it dates from 2009 – but I would not put it past some agents to be doing this still.
Which, again, is totally against the principles of agency law. Under agency law, the agent has a ‘duty of good faith’ to deal with his principal (in this case the landlord) fairly and not put his own interests first.
Good agents will do this as a matter of course. Others, however, won’t. Which category does YOUR agent come into?
And finally, I have another example of bad agent practice, which was not in the original post:
6. They are arranging long fixed terms with unsuitable tenants so they can take a larger commission up front.
They will put it to you that they have sorted your tenancy for several years to come. They have found a tenant who wants to stay for (say) three years. No need for you to worry about anything during that time.
So the tenancy agreement is signed and you are rather startled when they take three years worth of commission from the initial rent payments. But, hey! Never mind, you will have a steady income for the foreseeable future.
Then you find that the tenant is unsatisfactory. Maybe they fall into arrears, or constantly pay late, or annoy the neighbours by having loud parties, or are damaging the property.
And then you discover that you cannot use the section 21 procedure during the fixed term – which may (if the rent arrears are less than two months worth) mean that you are unable to get rid of them until the fixed term ends in two and a half years time.
Not good.
Although you can complain to the agents Property Redress Scheme about it, this won’t alter the fact that you are stuck with a poor tenant for a long time.
Constant vigilance
When the Tenant Fee Bill comes into force many agents will lose a substantial part of their income. Which means that some may be more likely to indulge in this sort of practice – in a desperate attempt to survive.
Not all agents – many agents are honourable and would scorn to do anything like this. But how do you tell a good agent from a bad one?
Landlords need to be on the watch for this sort of thing and you should thoroughly check out in advance any agent you are considering using. You will find some tips here.
And remember that having a sharp suit and flashy office does not necessarily mean that someone knows what they are doing.
