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7 Questions You Must Ask Your Letting Agent
Recommended by Tony Booth
Contrary to the myth, all letting agents are not the same. Some are good at what they do, some are mediocre – and some are very very bad. Identifying the rogue agents is crucial, if you hope to turn your letting into a smooth and painless property investment strategy.
I have been a property investor, estate agent and letting agent for many years, as well as being a published author and writer of property related books and articles. I have learned quite a lot in that time – and here are seven of the most crucial questions I would ask of letting agents (before I considered whether or not to employ them), if I were just starting out along the buy-to-let or property investment road.
1. Are you a member of a professional organisation?
Organisations such as the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA) in the UK have strict rules and a comprehensive code of conduct, which all members must observe. More important, they also have a redress system for members of the public to complain about the behaviour or performance of a particular letting agent, providing they are a member of either organisation.
Some letting agents feign membership to procure clients, so it is extremely important you confirm the validity of an agent’s membership by contacting the appropriate organisation.
2. Do you have professional indemnity insurance?
Many unscrupulous letting agents do not join professional organisations, because having professional indemnity insurance (PII) is often a compulsory requirement. This type of protection policy is very expensive and only those agents that run their agency as a legitimate business can usually afford the premiums.
Professional indemnity insurance protects both the agent and their clients, because most policies ensure the agent is following proper accounting procedures and keeping client and tenant funds separate from their business money. In the unfortunate circumstance where an agent’s business fails, having this type of policy usually means the tenant and client landlord get any monies back that are owing to them.
Needless to say, it is imperative you obtain details of the agent’s PII policy number and insurer, so you can verify it actually exists and assess what is covered.
3. Have you signed-up to the Ombudsman Scheme?
There are two Ombudsman schemes that govern lettings and agents are free to join which ever one they prefer or which ever is more appropriate, though most join The Property Ombudsman Scheme rather than The Surveyor Ombudsman Service. Both these organisations offer a means of redress when dealing with complaints and, since October 2008, it has been mandatory for all estate agents to be a member of an approved redress scheme.
The Ombudsman service is useful to consumers, not only because it is free but also because it offers a professional and independent review of any unresolved complaint received from a member of the public. Decisions made by the Ombudsman are binding on the agent, but not on the consumer, who is free to pursue further actions if they deem it appropriate. By being a member of the Ombudsman service, a letting agent is showing further evidence that he takes his business seriously and intends to or has adopted a professional approach to the services he provides to landlord investors.
4. Which Tenant Deposit Protection Scheme are you registered with?
In the UK, it is mandatory for agents and/or landlords collecting deposits from tenants to be registered with an approved tenancy deposit protection scheme. There are three approved schemes in England and Wales: The Deposit Protection Service (DPS), which is the only custodial service available to all letting agents and individual landlords; MyDeposits, which is operated in partnership between the National Landlords Association and an insurance company; and the Tenancy Deposit Scheme (TDS), which is an insurance-backed scheme.
Letting agents that cannot provide full details of the scheme they are registered with (which you should validate) should be considered highly suspect. While there are possible opt-outs to the approved schemes for individual landlords, professional letting agents cannot avoid compliance with this legislation.
5. What are your charges for letting and/or letting and management?
The fee structure should be transparent, straightforward, competitive and fair. If the fee structure given seems confusing or incomplete, ask for clarification and get it in writing. Agents are free to charge whatever they want within certain parameters, and unscrupulous agents have a tendency to inflict a multitude of fees that are hidden within the gobbledygook of a complex service agreement. Asking for an advance copy of the service agreement might help, but only if you know someone experienced in ‘jargon busting’ to explain what it means in plain English.
6. Do you charge for tenancy renewals to the same tenant(s)?
Most agents charge ‘something’ for renewals of a tenancy to the same tenant(s), but the charge should reflect the work involved. In most cases, the work involved is very small – and often little more than a few mouse clicks. Some agents have been known to charge an exorbitant amount for this service, despite the fact this type of fee has been severely criticised in the courts and in the industry in general. Get clear and concise information from the agent on what they will charge, so at least you know exactly what you are letting yourself in for in six or twelve months time.
7. Where and how will you advertise my property to let?
An empty property is of no benefit to a landlord investor, so it is important to know how the agent plans to get it let (quickly). Some agents also charge separately for some or all advertising, so make sure you ask the question and receive an answer about this before agreeing to it.
You might assume the agent will erect a To Let sign free of charge (but assume nothing). You might also assume the agent has a vast number of potential tenants on his books just waiting for your property to enter the market (but find out just how true this claim really is). In addition, you might assume the agent will handle viewing appointment requests in a fast and professional manner – but sometimes this is not the case.
Before employing any specific letting agent, try acting as if you were an interested tenant. Telephone the agent to book a viewing of a particular property being advertised. This somewhat clandestine exercise will provide an insight into how the agent operates and it will help you find out whether they actually do what they say they do.
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