Which Letting Agent (Service Contracts To Avoid)?

1) Transparent fees

Letting agents have a legal obligation to disclose their service fees on their website (if they have one) and their place of business under the Consumer Rights Act 2015.

Their fees must be clearly explained so landlords can understand the service and applicable fees. In some cases, it is plausible that certain fees cannot be reasonably be determined in advance, in which case the letting agents must describe how the fee will be calculated.

Be wary of letting agents that are not forthcoming with their fees, or make them difficult to access – that’s a clear red flag. Moreover, take the time to carefully look over their fees and question any that do not make sense or seem unreasonable.

2) Letting agency contracts and clauses to be wary of (i.e. the “Terms of Business”)

The “Terms of Business” is the contract between the landlord and the agent, outlining the terms of the services provided. Needless to say, it’s essential to read it thoroughly before signing. I’m still amazed by how many landlords drop the ball at this stage.

If something doesn’t make sense, seek clarification from the agent in writing so there is no doubt.

Here are some broad concept clauses to watch out for:

• Fee structure: Pay particular attention to the structure of standard fees and any other monetary clauses (e.g. Tenancy renewal fee, non-refundable fees), including penalties and fees that were not discussed during your conversations with the agent. Make sure you fully understand what you’re being charged for and when.
• Increased service fees: check for clauses that grant the agent the right to increase fees or include additional charges, and the stipulations around enforcement.

  If the contract includes a provision allowing the agent to raise fees without offering the landlord the option to terminate, this is likely to be deemed an “unfair term.” In such cases, request an amendment to the clause to ensure that the landlord can refuse any fee increases and terminate the agreement if desired.

• Tie-In & termination clauses: keep your peepers peeled for clauses that specify how and when you can terminate the agent’s services, along with any associated penalties. While it’s common for agents to require landlords to honour the contract for the initial tenancy term (typically 6-12 months), be cautious of any clauses that excessively restrict your ability to end the agreement beyond that period.

  Common examples of unfair termination provisions that landlords should watch out for include:

  • A clause stating that the landlord cannot terminate the agreement as long as the tenants placed by the agent is occupying the property.
  • A termination penalty, often called an “Exit Fee” and amounting to something like two months’ rent, can effectively lock the landlord into the agreement until the tenant moves out.

  If you can’t get the agent to scribble out those clauses, run, Forest!

• Tenant retention: Review clauses that explain what happens to the tenant if you decide to stop using the agent’s management services. Check if you can retain the tenant without hassle, or if there’s a fee involved.

  In other words, does the tenant remain the agent’s customer indefinitely, even if you cut ties with the agent? If so, you probably don’t want any part of that, because you could be subject to ongoing fees even if you have no active service contract with the agent itself.

  Ideally, you should be able to keep the tenant without any issues, penalties and recurring fees if you switch agents or choose to manage the property yourself.

• Sellers fee: Some agents include clauses that entitle them to a seller’s fee (e.g. 1.5%) if the tenant ends up buying the property. This particular fee really rubs me the wrong way, and I would personally avoid any agent that insists on it. While most landlords won’t be affected by the clause, the sheer audacity of agents to enforce it contractually is nauseating.

  I’m no legal bod, but I’ve been told it’s an “unfair term” from a legal standpoint. So you probably want to avoid anyone trying this one on.

• Repairs and maintenance: Full management services typically include arranging repairs and maintenance reported by tenants or noted during inspections.

  Here are two key issues to be wary of (if you plan on using a full management service):

  • Check if you are contractually required to use the agent’s preferred suppliers and contractors, or if you have the option to source and use your own. Ideally, you will be permitted to obtain your own quotes before making a decision.
  • Be aware that agents may add a percentage fee to contractors’ invoices, earning a commission from each job. So find out if that is the case, as this can result in higher costs for landlords.
• Landlord consent: Verify whether the contract allows the agent to perform tasks without the landlord’s explicit consent. This can include activities such as repairs, maintenance, property access, rent increases, or any other significant actions.

By carefully reviewing these clauses, you can protect yourself from being locked into BS agreements and ensure a smoother management experience. If you’re not satisfied with any clause, request for it be removed from the agreement – don’t feel pressured into signing anything that’s sending your spidey senses doo-lally!

Remember, don’t get the situation twisted – the agent works for you!

3) Tenancy Renewal Fees

One of the more notorious (and therefore noteworthy) fees that landlords might encounter is the “Tenancy Renewal Fee“.

This fee requires landlords to pay an [exorbitant] charge every time a tenancy is renewed after the initial fixed term, even if the letting agent does not facilitate the renewal process, such as by preparing new tenancy agreements.

For example, if you paid an agent £700 to find a tenant for a 12-month fixed term, the agent might then charge you a renewal fee (not necessarily the full £700 again, but often a percentage of it) if you choose to independently extend the tenancy after the initial period. This process, in theory, could repeat indefinitely if you have a long-term tenant.

The Tenancy Renewal Fee has been the bane of many landlords existence.

I’m not opposed to a Tenancy Renewal Fee if the agent assists with preparing new contracts and the fee is reasonable (which, unfortunately, it often isn’t). However, I am strongly against it if the agent simply continues to charge the fee with each renewal without lifting a finger (which is frequently the case, as many landlords handle and prepare their own renewal contracts – it’s not really that difficult).

So be wary of this bloody bear trap, as it’s one you could be stuck in for a very long time.

4) Only use letting agents that are regulated!

As of 1 October 2014, all letting agents are required to be members of one of three government-approved redress schemes. If an agent is NOT a member of at least one scheme, they are NOT complying with the law and could face legal consequences.

These schemes are designed to enhance consumer protection by holding agents to a specific code of conduct. Failure to adhere to these standards can also result in prosecution.

The schemes are:

• Ombudsman Services Property
• Property Redress Scheme
• The Property Ombudsman

Most agents will clearly display which approved scheme they are members of, whether it be on their website and/or shop window.

More details: Use Letting Agents That Are Registered With An Approved Redress Scheme For Consumer Protection.

5) Client Money Protection scheme (CPM)

In line with mandatory regulation, since April 2019, letting agents in England must belong to an approved ‘Client Money Protection’ scheme. Operating without membership in such a scheme is illegal.

The scheme is there to ensure landlords and tenants are compensated if letting agents cannot repay money, for example, if the agent goes into administration.

Your agent should belong to any one of the following approved schemes:

• Client Money Protect
• Money Shield
• Propertymark
• RICS
• Safeagent (previously NALS)
• UKALA Client Money Protection

Every letting agent is also legally required to display a certificate in their public office or website to confirm which CPM scheme they belong to.

6) Year established / Reputation

I would avoid using an agency that opened its front doors for the first time last week. Similarly to the pub trade, dozens of letting agents are closing down on a daily basis. It’s tough out there.

Look for well established agencies/branches that have a good reputation- they’re the ones that will be less inconvenienced by the economic turmoil.

An established agent WILL have a reputation, whether it be good or bad is another question. If possible, talk to other landlords that have used local agents to receive feedback. Moreover, I can almost guarantee that if an agent supplies a poor enough service, someone would have written about it on the internet somewhere. Ahhh, the power of the internet. Use Google to hunt down reviews of your local letting agents.

7) Average time to fill vacancies

A good agent will have a quick (or at least competitive) vacancy fill rate in line with market conditions. That signals that they’re active and marketing in the right places.

It’s always worth asking agents what their current vacancy fill rate is.

Yup, the agents may pull a fictitious number out of their baggy butthole (and most likely will), but it’s always good to get a benchmark figure. If an agent predicts 2 weeks, and it takes them substantially longer, it won’t reflect well on them, consequently it should be in their best interest to meet their targets and improve on their average.

8) Pre-qualifying application forms

How weird! Apparently some letting agents don’t require prospective tenants to complete pre-qualifying application forms – that’s a major red flag to me.

Find out if your agent does or not.

Pre-qualifying application forms are crucial to screening tenants as it helps massively with identifying the suitability of the applicant from the offset, and consequently avoids a lot of time-wasting.

If an agent skips this step, it signals to me that their primary focus is to fill vacancies ASAP, rather than focus on quality/suitability. But above all, it demonstrates a lack of due diligence, which isn’t great.

9) Marketing & advertising presence – Rightmove & Zoopla

A good agent will have a powerful marketing presence both locally and on the internet. Find out which mediums’ the agents are utilising.

Personally, I wouldn’t use an agent that doesn’t advertise on the UK’s biggest property portals, including Rightmove and Zoopla – those two are crucial in my view!

10) Quick response rate

When I send an enquiry to an agent, I expect a sharpish response. Time is money and all that.

More importantly, a quick reply is a hallmark of professionalism, and it’s the standard of service I expect.

I recently came across an article (though I don’t recall the source) that discussed research showing people expect to hear back from agents almost immediately – typically within an hour, but definitely within 24 hours. I don’t find that hard to believe for one second.

Response times can be a good indicator of the service you can expect. If an agent is slow to respond, it’s reasonable to assume that their overall service may be similarly lacking.

Agents should be responsive from the moment you make contact. If they’re not, proceed with caution.

11) Agent should be able to cover A-Z

Letting agents should have the contacts and resources to handle the entire A-Z for a landlord. That means handling the finer details from arranging all the necessary contracts to ensuring you’re meeting all your landlord legal obligations (bear in mind, it’s YOUR responsibility to ensure you comply, not the agents), including Energy Performance Certificate (EPC) and a Gas Safety Certificate. Not to mention, the extra “sensible” precautions, like complying a solid inventory.

Seems pointless using a letting agent if they require you to do some of the legwork.

12) There’s always a right tenant for your property (and vice versa)

Remember, it’s the landlord who will bear the cost of a bad tenant, not the agent!

I’ve had the uncomfortable experience of paying an agent good money for a tenant-find service, only to be presented with comically unsuitable applicants. They were so ill-fitting in so many ways that it was hard to believe. I could have assembled a group of equally mismatched candidates under a bridge! And this wasn’t a one-off; it’s happened repeatedly with different agents.

It quickly became clear that agents prioritise speed over quality when you’re only paying for a tenant-find service. Once they’ve filled the vacancy, their job is done, and they’re ready to move on. They had no incentive or process in place to ensure a good match from both sides, as it made no difference to them. That’s the conclusion I came to, anyway.

So a few takeaways here:

• Consider it a red flag if an agent consistently presents you with clearly unsuitable applicants.
• While not all landlords may want to meet potential tenants (after all, that’s what you’re paying the agent for), I still recommend meeting any prospective tenants yourself if you can. Even if meeting them isn’t feasible for you, make sure your agent is open to you attending viewings or meeting applicants before any decisions are made.
• Ensure your agent allows you to have the final say on who becomes your tenant and who doesn’t.

13) Defining the type of tenant you want

Tenants come in all shapes and sizes. Some are good, some are terrible, and some are better matched to certain properties and landlords than others.

A competent and diligent agent will ask you exactly what type of tenant you will want e.g. tenants with pets, tenants that smoke, single tenants, DSS, family etc.

If they don’t ask, make it clear what you’re after BEFORE agreeing to work with them.

14) How appealing are their adverts?

Examine other properties the agent is currently letting for other landlords by checking their shop window and listings on Rightmove and Zoopla. Assess whether their adverts are descriptive and well-presented – would they persuade you to make an enquiry?

Pay particular attention to the photos used. They should be high quality, featuring good composition of key rooms and features, high resolution, and proper lighting. High-quality photos can make or break your campaign.

I’m always left bewildered when I jump onto Rightmove/Zoopla (or any other property portal) and see vacant properties with hideous photography; blurry as hell, lop-sided, terrible compositions, and clouded by profoundly poor lighting. Poor presentation will drastically reduce enquiries! Here’s a more in-depth article on the importance of using professional photography and how they improve conversions!

If you’re using a high-street agent (as opposed to an online letting agent), it’s usually their responsibility to take with a good quality camera and wide lens, because that’s what you’re paying a premium for! So make sure you’re getting your money’s worth!

Landlord out xo