One of the most important decisions landlords make is whether to use letting agents to find tenants and/or manage the property once the tenants have moved in. Great letting agents and property managers can totally transform the experience for landlords and tenants alike. I’ve personally had two fantastic letting agents who helped me enormously and I had no problems with them at all.
However, I’ve also had one dreadful letting agent, whose continuing incompetence has caused me a lot of problems and stress as a landlord. This experience led me to become an NRLA Accredited Landlord, and start doing my own tenant finds through OpenRent.
If the number of emails I get from other landlords about problems with letting agents are anything to go by, my experience is not unusual. To make things worse, it can be difficult to find out what rights landlords have when things go wrong with their letting agents. Many don’t have their complaints procedure on their website.
The good news is that I set out in this comprehensive blog post everything landlords need to know about avoiding and resolving problems with letting agents. In writing this blog post, I draw on my own experience as a landlord who has used letting agents and as a lawyer experienced in dispute resolution.
Quick Links: Landlords’ rights with letting agents
- What services do letting agents and property managers provide landlords?
- What information must letting agents give landlords about fees?
- Requirement for Letting Agents and Property Managers to join Redress Schemes
- What is the role of Propertymark in resolving disputes?
- How to terminate a property management contract with letting agents
- Summary of how landlords can make complaints against letting agents
- Final thoughts
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What services do letting agents and property managers provide landlords?
To avoid unrealistic expectations, it’s important for landlords to be clear about what they’re engaging letting agents to do. This also includes what will be charged as an extra, over and above the standard fee. The exact services and the basic of charging differs from letting agent to letting agent, even those within the same group (eg Countrywide).
If landlords are clear in advance about what to expect from their letting agents, this will help reduce the likelihood of problems later. Also, it’s definitely worth negotiating with letting agents and property managers on their fees and, importantly, what’s extra, at the start, particularly if you have a portfolio.
I’ll first explain the two different types of work carried out by letting agents, namely letting agency work and property management work, and what to watch out for.
1. Letting agency work
Section 83 of the Enterprise and Regulatory Reform Act 2013 defines letting agency work as (and I paraphrase) things done by an agent in the course of a business in response to instructions from a landlord who wants to find a tenant.
What does this actually mean in practice?
From a legal perspective, there is “agency” relationship between the landlord and the letting agent. To borrow the words from Thomson Reuters’ definition of agency, a letting agent helps arrange a tenancy agreement between the principal who instructs them (a landlord) and a customer (a tenant), in return for commission.
The letting agent therefore arranges a tenancy agreement is between the landlord and the tenant. Often the letting agent will sign on behalf of the landlord, but this is as an agent, and not the principal. Also, the letting agency works for the landlord, and not the tenant.
There are many sorts of letting agency work, with different service levels and different price points. In order to avoid problems later, landlords need to understand what they’re buying from the letting agents, and the price of each part.
What does a “tenant find” or a “let only” service mean?
A tenant find or let only service is a basic level service where the letting agent finds a suitable tenant on a one-off basis. The fee is payable up-front. This can cost around a month’s rent, although some charge 10% + VAT of the gross rent for the fixed term (for instance Tucker Garner).
However, landlords must check what‘s included in the basic let only fee, and what’s charged as an extra. You should be able to find out by looking on the letting agent’s website, as it’s a legal requirement under the Consumer Rights Act 2015 for letting agents to publish fees on their website. Sometimes the fees aren’t easy to find on the website, and it might be quicker to check for the link on Google.
The basic fee will usually include advising on the rent, advertising the property with photos, arranging viewings and receiving the first month’s rent. As part of this they may include a “compliance check”, ie whether the landlord has done the relevant safety checks. For instance, the EPC, Gas Safety Certificate and EICR, smoke alarms and CO alarms.
Other aspects of letting agency work done during a tenant find are often charged as extras. This may include taking professional photos, creating a floor plan, conducting references and right-to-rent checks, setting up the tenancy agreement, handling the deposit registration and creating an inventory. Some charge extra for the compliance check.
Once the tenant moves in, the relationship is handed over to the landlord, who will manage the property themselves (or in conjunction with a property VA).
Online letting agents
I now use the OpenRent Rent Now service for my tenant finds for £69, which includes advertising on the portals, use of their portal for communication with applicants, the tenancy agreement and deposit administration. Referencing is £20 per applicant and the inventory for a 3 bedroom house is £115. It involves a bit more work for me, but the cost savings are significant.
OpenRent is a member of The Property Ombudsman.
>> Related Post: How to find tenants using OpenRent
>> Related Post: Landlord Guide to Self-letting
What is a let and rent collection service?
A tenant find and rent collection service includes the tenant find service and extras outlined above, plus collecting the rent.
This involves chasing up rent arrears and providing assistance if the tenants don’t pay the rent in full. It won’t include debt collection or legal advice.
A let and collection service usually costs 12% including VAT of the gross rent as an ongoing monthly charge. The agent deducts this from rent before they send it to the landlord.
What’s a tenancy renewal service?
Letting agents will invariably be in touch around 10 months after the start of the tenancy to offer their tenancy renewal service. This involves the agent proposing a new rent, negotiating it with the tenants and doing the paperwork.
There isn’t actually a need to “renew” a tenancy – if you do nothing, it will automatically become a statutory rolling monthly periodic tenancy. But it’s a nice bit of additional income for the letting agent, and can save the landlord from having to discuss a rent increase.
That said, it’s relatively straightforward to increase rent yourself if you follow the process, and I have a full guide in the blog post below:
>> Related Post: How to increase rent
>> Related Post: What is a Periodic Tenancy?
2. Property management work – what does it mean?
Section 84 of the Enterprise and Regulatory Reform Act 2013 defines as property management work as (and I paraphrase) things done by a property manager in the course of a business in response to instructions from a landlord who wants to arrange services, repairs, maintenance, improvement, or insurance or to deal with any other aspect of the management of residential premises.
Property management work can be done by a letting agent or a standalone property management company.
Often, property management work is bundled with letting agency work and priced under a “full property management service”. However, it’s technically a different service, and involves everything after a tenant moves in.
What is included in a full property management service?
A full property management service will usually include the following:
- Tenant find (some charge an additional set up fee), ie the letting agency work discussed above.
- Point of contact for tenant, providing a buffer for the landlord during the tenancy
- Arrange repairs and maintenance up to a certain pre-approved amount
- One inspection visit per year
- Rent collection and transmission
- Chasing ‘initial arrears’ from tenants (not formal debt collection)
- Checking off annual safety certificates and arranging renewals eg gas safety certificate (charged separately). Some agents charge a separate compliance fee for this
- Annual renewal for another fixed term (sometimes not included in the price, which means an additional fee)
- Changeover of utilities (agents sometimes have preferred suppliers who give them commission).
How much are full property management service fees?
Most agents charge landlords a standard fee to provide a full management service. The fee is usually a percentage of the rent and is like a commission or a retainer.
Fees for full management tend to start around 12% + VAT (ie 14.4%) of the gross rent per calendar month, and go up to 17% + VAT (20.4%) (eg Hamptons). This means that, on average, landlords spend well over £2,000 each year per property on the management fee alone. (I use the average fee of 14.4% and the average national rent of £1,278 in Q3 2023, according to Rightmove).
Landlords pay this property management fee, even if nothing goes wrong with the property, for so long as these tenants rent the property. (Unless the landlord terminates). The agents deduct this fee from the monthly rent which they collect on than landlord’s behalf. If the rent goes up, the fee goes up in parallel, just like commission.
What’s not usually included in the fully managed service fee?
The fully managed service is a bit like full board at a hotel. Your food and lodging are included, but you’ll need to pay for drinks and a long list of extras. It’s not all-inclusive, and the exact detail of what you get varies from agent to agent. It’s therefore really important to check what is and isn’t included, so you can avoid problems later, and maybe even negotiate a better deal with your letting agent up front.
As an example, I’ve cut and pasted the extras in the small print of an agent’s terms and conditions (Connells in Maidstone) into the graphic above. These services are considered ‘additional’ and aren’t included in the management fee. Again, it varies considerably per agent, so don’t be afraid to ask for clarification.
Often the agents add a mark-up to repairs. For instance, you can see that Connells in Maidstone add 10% if the repairs cost £750 or more , which can add a lot if they organise a new boiler. For supervising redecoration, it’s 10% of the cost of the words, plus £100 for arranging an estimate to supervise painting the exterior. The terms are vague about what “supervise” means and they’re under no obligation to try to keep costs down.
Check the small print carefully. Property managers need to publish their full fees on their website, so study it carefully.
Do try to negotiate lower rates before you sign up. It’s usually easier to do it then, as they’re keen to win your business. Just like negotiating car insurance! And do read the small print before you sign off. Make sure any agreement you reach with them that differs from their standard terms is confirmed in writing.
What are compliance check fees for landlords?
Some agents charge extra for “Landlord Regulation Checks” or “Compliance Checks”. These are an additional fee for the letting agent, ostensibly to ensure the landlord is compliant with legislation.
For instance Countrywide letting agents, Tucker Gardner, charge £11.40 pcm for: “HMO Licence monitoring, Deposit/Deposit Replacement Service, Service of Notices, Legislative Horizon Scanning, Checking Smoke and CO Alarms at commencement of tenancy”. This wording is used for other Countrywide letting agents such as John Wood & Co. The fee isn’t reduced for single lets where an HMO licence isn’t relevant.
I think it is very cheeky (even outrageous) for letting agents and property managers to charge extra for compliance checks. It should be included in the standard full management service fee! Look out for this on the property manager’s fees, and ask for it to be waived. If they won’t waive it, go elsewhere. We landlords can vote with our feet.
What information must letting agents give landlords about fees?
Letting agents have a legal obligation to publish information about their fees for letting agency and property management work on their website and their place of business under the Consumer Rights Act 2015.
The description of the fees must be sufficiently detailed so that the landlord can understand the service and cost covered by the fee. If the amount can’t “reasonably be determined in advance”, then the letting agents must describe how the fee will be calculated.
My advice is to print off the list of fees before you even talk to letting agents and property managers, and highlight those you do not consider reasonable. Negotiating fees at the start will help you avoid problems and nasty surprises later.
Requirement for Letting Agents and Property Managers to join Redress Schemes
In 2014, the government introduced a legal obligation for those undertaking lettings agency work and/or property management work in England to become member of a redress scheme for dealing with complaints.
What is the purpose of redress schemes in England?
Government Guidance also states that redress schemes “will help weed out bad agents and property managers and drive up standards”. More detail is in the Explanatory Memorandum that accompanied the regulations:
It is important that people living in or owning property in [the private rented sector] have the ability to complain if they receive poor service from their agent.
Common complaints about lettings and property management in the private rented sector are around how agents handle the security and holding deposits, missed appointments, pressuring tenants to take tenancies, poor customer service, out of date and misleading adverts and opaque and variable fees.
Many landlords also appoint an agent to manage their properties on their behalf with common complaints about how the property is managed being around repairs not being carried out in a timely manner or to a satisfactory standard, general customer service and notice and conduct of visits from agents.
What if letting agents and property managers don’t belong to a redress scheme?
Under the Redress Schemes Order, an “enforcement authority” (ie a local authority) can impose a fine of up to £5,000 on anyone in England who carries out lettings agency or property management work without being a member of a redress scheme.
Overview of The Property Ombudsman
All members of The Property Ombudsman (TPO) are required to comply with their General Membership Obligations. These contain an obligation to “provide a service consistent with fairness, integrity and best practice”. Members are also required to maintain and operate an in-house complaints procedure. The document is a little under two pages long.
The complaints procedure must be in writing and available on their website, as well as being available at the office. Members must display the relevant TPO logo on their website, letterheads and office window.
Members of TPO have the option of signing up to the Code of Practice for Residential Letting Agents. The Code is significantly more detailed and extends to 14 pages. For instance, it states “all verbal and written complaints must be recorded by you at the time they are made”, with all written complaints acknowledged within 3 working days, a proper investigation carried out, with a written outcome of the investigation sent to the landlord within 15 working days.
Members who sign up to the Code of Practice can display the Approved Code logo.
The point of the redress scheme is that if landlords are dissatisfied with the outcome of any complaint to the letting agent and/or property manager, they can effectively escalate it to The Property Ombudsman. Landlords can do this by filling in an online form. There is a helpful online chat facility with a real person (not a bot – I tested it myself!)
Overview of the requirements of the Property Redress Scheme
Unlike The Property Ombudsman, the Property Redress Scheme doesn’t have a Code of Practice and refers to “just reasonable standard industry practice”. This is not defined, and I’ve not been able to find out what this means.
Members are required to agree to abide by the Property Redress Scheme Terms of Reference and the decisions of the scheme.
The PRS only accepts complaints from landlords where they have followed the agent’s formal complaints process, at least 8 weeks have passed, and there’s no response or “no satisfactory resolution has been reached”. There is an online form for complaints, but no live chat.
For landlords to be able to complain to the PRS, any of the following must have happened:
a. A breach of the Agent Member’s obligations under the law;
b. Where legal rights have been impinged or breached;
c. Where an Agent Member has not acted in accordance with a Code of Practice it has signed up to, or any internal rules, procedures or statements of practice;
d. Unfair treatment of the complainant by the Member; including, but not limited to: i. rudeness or discourtesy ii. not explaining matters iii. poor or incompetent service iv. avoidable delays
e. Where an Agent Member has not administered a transaction as efficiently as would be expected.
f. The Agent’s actions must have resulted in the complainant suffering a financial loss, or unnecessary aggravation, distress and/or inconvenience.
What is the role of Propertymark in resolving disputes?
If landlords are unhappy with the outcome of a decision of the agent and either redress scheme, they can refer the complaint to Propertymark, provided the agent is a member of Propertymark. Not all agents are members of Propertymark, so it is wise to check the agent is a member before engaging them. This means there will be another layer of scrutiny, if needed.
Propertymark will investigate the following complaints:
- Failure to provide a complaints procedure
- Misuse of client money
- Failure to uphold high standards of ethical and professional practice
- Failure to protect and promote clients’ interests
- Conflicts of interest
- Failure to answer correspondence
- Any act of dishonesty or conviction of a criminal offence
Appropriate cases will be heard at a formal disciplinary hearing in front of an independent tribunal. The complainant must have used and completed the agent’s internal complaints procedure. There must also be a case to answer with enough evidence to proceed. If the member admits the breach, it won’t go to the independent tribunal.
>> Related Post: How to avoid fake or rogue letting agents
How to terminate a property management contract with letting agents
Sometimes it’s not possible to resolve issues with property managers. Many landlords come to regret outsourcing property management, as the service isn’t always what it should be. Unless you’re very lucky, the agent won’t care about the property as much as you. And unfortunately, some are just not very good.
The best thing is to negotiate your termination rights up-front, before you engage a property manager. They tend to be more flexible with termination provisions in a bid to win your business. But usually landlords don’t think of this at the time.
It can be difficult to extricate yourself from property managers, without paying a fee or giving due notice. However, it has thankfully become easier since the Office of Fair Trading won a landmark case against Foxtons in the Court of Appeal in 2009 banning unfair tie-ins.
They may try to talk you out of it, using the standard scare-mongering tactics about the “170 pieces of legislation” and “how will you deal with emergencies?”
However, you will be able to terminate your agreement. Just be determined about it. Most management contracts require landlords to give a certain period of notice, ranging from 2-6 months. During this notice period, you may have paid another 7% of your annual rent in fees, but then you’ll be free. You can argue it’s an unenforceable penalty to negotiate an earlier exit, particularly if it’s after the first year, but it’ll be a hassle.
Don’t forget that if you do take over from a managing agent, you’ll need to check the tenancy agreement to see if the address for the service of notices is your agent’s address. If it is, you’ll need to send a Section 48 Notice with a revised address for the service of notices. Click here for details of which addresses you can use in a Section 48 Notice – it’s not necessarily your home address.
The easiest way to start to self-manage is to wait until the tenants move out, and then go it alone. Above all, don’t worry about finding the next lot of tenants given the high levels of demand at the moment. You can either do a “let only” service with an estate agent, or use an on-line letting service like OpenRent.
>> Related Post: How to terminate the management contract with your letting agent
Summary of how landlords can make complaints against letting agents
These are the steps that landlords should take to resolve problems with their letting agents and/or property mangers:
- Explain your concerns to the local office. if they don’t resolve it, either download thei complaints procedure, or ask for it.
- Follow the complaints procedure. If it’s a branch office, there might be an option of escalating it to the head office / group (eg Countrywide).
- Go through the full complaints procedure of the agent until you have a decision.
- If unsatisfied with the decision, or if you don’t get an answer within 8 weeks, escalate the complaint to the relevant redress scheme, by submitting an online form.
- If unsatisfied with the outcome, submit complaint to ARLA Propertymark, if the agent is a member.
- If a complaint about poor service is turned down by the property manager, get advice on how to terminate the contract, and take your custom elsewhere!
>> Related Post: How to terminate the management contract with your letting agent
Prevention is definitely better than cure when it comes to dealing with problems with letting agents. It’s really important for landlords to do their due diligence on fees, and what’s extra.
Landlords should not have to put up with poor service, and should follow the complaints procedure. If that fails, there are one or two levels of independent appeal, depending if the agent is a member of ARLA Propertymark.