Why and how landlords must manage letting agents

When Jas Athwal, one of the new cohort of Labour MPs, was confronted by the BBC with allegations that he was in breach of many of his legal obligations as a landlord, he responded: “My properties are managed by an agency, selected for their quick response times and excellent customer service”. 

Yet, within a short period of time, Mr Athwal had sacked his agent. He released a statement on X saying: “I am shocked and sickened by the series of problems that have come to light. I had not been aware of these issues until this week, for which I am furious. I have immediately dismissed the managing agent of my properties”.

We don’t know the identity of Mr Athwal’s former letting agent, other than the fact his tenants referred to the agent as “Raymond”, or why the properties had got into such a state and the selective licences apparently not renewed. Mr Athwal has not confirmed whether he is making a formal complaint and referring it to the agent’s redress scheme.

However, all landlords who use letting agents should take note when Mr Athwal correctly, if belatedly, said on X: “as the landlord, the buck stops with me”.

If Mr Athwal really does want Labour to crack down on rogue landlords (see his comments on X from 2018 below), he would do well to start with letting agents, and encourage the government to implement the recommendations of Lord Best’s working group from 2019.

Lord Best called for regulation of all property agents by an independent regulator, with mandatory qualifications and a code of practice, summarising as follows: “We agree that a new approach is needed: regulation will provide the opportunity to prevent bad practice and drive cultural change within the industry”.

There is currently scant regulation of letting agents, no central register and no minimum qualifications necessary for someone to set up as an agent. It’s the wild west.

Despite what some letting agents claim, landlords cannot “let and forget”. Landlords can’t safely appoint agents and wash their hands of their properties, in the mistaken belief that being a landlord is passive income. Not all agents live up to the sales patter in their marketing. Even Jas Athwal said he’d believed his agent provided “excellent customer service”.

In this blog post, I explain what landlords should do when they appoint letting agents to make sure they are competent and will manage the properties in accordance with the law. In other words, what due diligence should landlords carry out both before they appoint letting agents, and what landlords need to do while agents manage rental properties for them.

The short version is: trust but verify.

>> Related Post: How landlords can get the best from letting agents

Why it is so important for landlords to be careful when they appoint agents

Agents have “ostensible authority” to bind their principals

Landlords are bound by everything agents do on their behalf because, under the law of agency, provided the agent is doing something in keeping with being an agent, they will have “ostensible” or “apparent” authority to bind their principal, the landlord. This is the case even if the landlord has not given permission to the agent.

Let’s take an example of a landlord having a “no pets” policy. If the letting agent signs an addendum to the tenancy agreement which authorises the tenant to keep a dog, the landlord is bound by that. They might have a claim for breach of contract against the agent if they can prove this was against their explicit instructions, but the landlord wouldn’t be able to do anything about the dog.

If an agent doesn’t serve the prescribed in accordance with Section 213(6) Housing Act 2024, say by forgetting to serve it or not serving it with 30 days following the payment of the deposit by the tenant, it will be the landlord who cannot serve a Section 21 notice unless they repay the deposit.

The buck stops with the landlord for breaches of the law

As the landlord, the buck stops with me, and I unreservedly apologise to my tenants for the unacceptable experiences they have endured. (2/3)

— Jas Athwal MP (@Jas_Athwal) September 1, 2024

Even if the landlord uses an agent, the landlord can still be held liable for breaches of the law. The fact they use a letting agent may be a mitigating factor, but as even Jas Athwal recognised, the buck stops with the landlord.

Here are a couple of examples:

• Breach of deposit rules. If the agent doesn’t comply with the deposit rules, it will be the landlord who the court orders to pay the tenant between one and three times the value of the deposit under Section 214(4) Housing Act 2004. The landlord may be able to bring a claim against the agent for breach of contract, but they are the one primarily liable to the tenant.

• Failure to license property. This is one of the alleged breaches by Jas Athwal. if a letting agent doesn’t advise the landlord that the property needs a selective licence, the landlord may have to pay a civil penalty of up to £30,000 by the local authority for each unlicensed property under Section 95 Housing Act 2004. The tenants can also apply for a rent repayment order for up to one year’s rent if the property is unlicensed. (If the Renters’ Rights Bill follows the Renters (Reform) Bill, this rent repayment order might be increased to two years’ rent).

>> Related Post: Changes to the Rent Repayment Order rules in the Renters (Reform) Bill

7 tips to check if a letting agent is any good

Although there are many excellent agents, it does not go without saying that your typical high street letting agent does know what they are doing. Landlords need to know what signs indicate that they’ve found one of the good agents before they sign up with them.

Here are 7 tips to check if a letting agent is likely to be good:

1. Does the agent get these basics right?

If the agent doesn’t get its own compliance right, how can the landlord trust them to comply with all the laws that landlords need to respect?

I consider the following to be red flags as they show the agent can’t get the basics right:

Their Client Money Protection certificate on their website is not up to date

The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 require letting agents who hold client money to join a “client money protection scheme”.

As agents must display an up-to-date copy of the certificate on their website, check to see if the link from their website is to a current certificate. Often the certificates on websites have expired, which shows a lack of due process, especially as they can be fined up to £5,000 if they don’t display their certificate on their website.

You cannot find their fees easily on their website

Section 83 Consumer Rights Act 2015 requires letting agents to publish their fees on their website. Some agents don’t make it easy to find the fees from their home page, and bury them.

If it’s difficult to find the fees on the website, it shows they don’t have the customer experience at the heart of their decision making, which isn’t a good sign.

They are late in their filings at Companies House

It’s free and easy to check Companies House to find information on companies. If a company has a history of late filings or overdue accounts, it’s a sign that it’s not well run.

You can also check the names of individual directors to see where else they’ve been a director. This can be very useful as you can see whether the directors have a history of being directors of insolvent companies.

>> Pro tip: Search the Companies House Register for free here

>> Related Post: How to avoid rogue or fake letting agents

2. Are the staff in the branch properly qualified?

Lettings law is complex, but are the people you would actually deal with in the branch properly qualified? Ask how many of the staff in the branch have an appropriate qualification, eg Propertymark’s Level 3 Award in Residential Letting and Property Management.

Letting agents which invest in their staff are likely to have the sort of culture that focuses on compliance and customer service. If the staff don’t know what they’re doing, how can they make sure they act in accordance with the law?

With the Renters’ Rights Bill set to increase complexity even further, landlords should avoid agents who do not have have qualified staff.

3. Pose as a tenant for a mystery shop

A tried and tested way to assess whether a business does a good job is to do a “mystery shop”. Phone up and pose as a tenant who wants to view a property. What questions do they ask you? Are they polite and friendly? How long do you have to wait on the phone before they answer? If you leave a message, do they get back to you quickly? Are they able to answer questions about one of their properties? What impression do they give you?

4. Do they have good quality listings?

Before engaging a letting agent, have a look at their listings on the portals for the following to see if their listings are good quality:

• Is there an EPC? (If not, it shows they are not organised enough to have arranged for it before the listing)
• Is there a floor plan? (It shows they care about providing information to prospective tenants, and avoid people wasting their time).
• Are there lots of good photos? (So many photos are poor, whereas it’s not difficult to take good photos with a mobile and a tripod. It just takes a little care).
• Is the description appropriate, with all material information?

5. Do they have unfair terms in their agency contract?

A big red flag is where agents try to lock in landlords with high penalty charges to terminate an agency agreement. It shows the wrong mindset; one that is not focused on customer service.

>> Related Post: What to look out for in the small print of letting agent contracts

6. How often do they carry out inspections?

It is a good sign if agents offer two inspections a year as part of their standard package. A lot can happen in a year, and it’s good practice to check properties in different seasons. Ask them to provide a full report with photos after each inspection.

7. Are they a member of Propertymark?

Letting agents who belong to ARLA Propertymark are subject to a higher level of supervision and regulation than those who don’t. The principals, partners and/or directors of the agency will have a qualification and are answerable to Propertymark.

Letting agents that belong to Propertymark must also comply with Propertymark’s Conduct and Membership Rules, in addition to the rules of their redress scheme.

Of course, it doesn’t necessarily mean that every single employee is qualified or good at their job, just as there are many qualified solicitors who are regulated by the Solicitors Regulation Authority who are are not good at what they do.

Also, some excellent letting agents choose not to join Propertymark, and have well qualified staff.

But it’s a good starting place if you haven’t had a recommendation from another landlord.

What landlords should do when they start with a new letting agent?

It’s vital for landlords to understand what they are delegating to their agent and what they are responsible for themselves.

For instance, if a landlord is only using an agent for a tenant find, the agent won’t be responsible for telling the landlord that a ndw selective licensing scheme has been introduced. Likewise, if an agent provides rent collection, and not full property management, it will. be the landlord who is responsible for ongoing compliance.

How can landlords check their letting agents are doing a good job?

Here are some tips for landlords to keep tabs on how their letting agents are managing their properties:

• Ask the agent to inform you each month about repairs and the turnaround times for repairs. Also, make clear to the agent that you want to be provided with copies of the invoices from the relevant trades.
• Ask the agent to advise you promptly when tenants fall into arrears, and be clear who is responsible for following up.
• Accompany agents on at least one inspection a year so that you can see for yourself the condition of the property and whether the tenants are happy.
• Make sure your agent provides a full report after an inspection with photos so you can see the condition of the property.

Some agents provide excellent management information to landlords via a dashboard.

What can landlords do to protect themselves against bad agents?

Learn about landlords’ responsibilities

Knowledge is power, and it’s no different for landlords.

The best way for landlords to protect themselves is to take the time to learn about their responsibilities themselves. The NRLA do a relatively short course called Landlord Fundamentals which takes 5 hours to do online, and this will not only enable provide landlords with the knowledge required to ensure they have complied with their legal duties, but they will also become an Accredited Landlord.

Keep up to date with changes in the law

It’s really important for landlords to keep up with changes in the law, especially with the upcoming Renters’ Rights Bill promising to make far-reaching standards.

An easy way is to sign up to The Independent Landlord weekly newsletter – it’s free and flags what landlords need to know.

Check regularly whether they need a licence

Make a note to check once a year if the local authority has launched selective or additional licensing in your area. You can check this on the council website, and the one for London is below.

If you do need a licence, make sure you don’t let it expire without renewing it!

>> Useful Resource: London Property Licence Checker

Ask for copies of documents

Landlords should ask for the agents to provide the following documents for each tenancy so the landlord can not only check everything is being done correctly, but it will make it easier if the landlord ever wishes to take over management from the agent if they don’t do a good job.

• Tenancy agreement, any renewal agreements and guarantees.
• Details of rent increases, including copies of any section 13 notices.
• Schedule of rent payments made by the tenant.
• Check-in inventory.
• All gas safety certificates, EICRs, and EPCs, and proof they were served on the tenant. You will need to prove that the gas safety certificate and EPC was served on the tenant before they move in should you ever wish to enforce a Section 21 notice to recover possession.
• All inspection reports during this tenancy.
• Did the tenant cooperate with access? Has the tenant refused access for inspections or repairs?
• Repair log for the property, including any guarantees for appliances or a new boiler, and proof the Building Regulations Compliance Certificate for any new boiler was served on tenants – see case report on Van-Herpen v Green & Green. Hastings County Court. 17 November 2023).
• Deposit information – ask for a copy of the deposit protection certificate. Ask for proof that the prescribed information was served on the tenants within 30 days of the payment of the deposit. You will need this proof if you ever serve a Section 21 notice (unless you give the deposit back).
• References and credit checks of all tenants, permitted occupiers and subtenants. (Don’t ask for the details of unsuccessful applicants).
• Documents from the tenants’ Right to Rent checks, and any follow-ups.
• Any licences and correspondence with the local authority. If the property is an HMO, the name of the HMO manager on the licensing will need changing.
• Copies of all material correspondence with tenants, for instance, complaints about repairs, follow-ups after inspections, or letters about previous rent arrears.

Be aware that landlords who have these documents will need to register with the Information Commissioner’s Office (ICO) and have a Data Protection Notice.

>> Related Post: Practical tips to take over management from letting agents

What should landlords do if they’re unhappy with their agent?

If landlords, like Jas Athwal, are unhappy with the service provided with their letting agent, they should make a complaint to the agent.

The landlord should ask for a copy of any complaints procedure. Agents registered with The Property Ombudsman are obliged to have a formal in-house complaints procedure. On the other hand, agents with the Property Redress Scheme do not need to have their own complaints procedure. If they don’t have one, the landlord should send their complaint to the branch manager or the director/owner.

If the landlord is unsatisfied with the outcome of their complaint, they should refer it to the relevant redress scheme.

If the landlord actually wants to terminate as the service is so poor that it is in breach of contract, they should serve a notice of termination and also make a complaint. Jas Athwal sacked his agents, but we don’t know if he has made a complaint. He should.

>> Related Post: When can landlord terminate due to agent’s breach of contract?

>> Related Post: Outline letter of complaint to agent