Letting agents are professionals who handle the legalities of managing and renting out a property, including finding tenants, negotiating contracts and managing your affairs relating to renting out the property. They can also help with maintenance, repairs and other tasks when renting a home.
Types of letting agent services
A letting agent may offer two types of services, a let-only service and a full management service. Both services have advantages and disadvantages, as well as differing costs.
Let only service
A let-only service is also known as a tenant-find service. Here, the letting agent is responsible for sourcing the tenant or tenants for the property on behalf of the landlord. This task involves visiting the property, taking photos, drawing up a floor plan to show prospective tenants and conducting viewings.
Marketing the property is done through established channels like word of mouth, newsletters, online websites and platforms like Rightmove and Zoopla. Once individuals show interest in the property, the letting agent can organise viewings to find tenants.
The agent will be responsible for vetting the tenant or tenants. This involves:
- Verifying identity
- Credit checks
- Verifying income
- Obtaining references from previous landlords and employer
- Conducting right-to-rent checks
- Verifying guarantor information (if applicable)
The agent is in charge of conducting references and would usually outsource this to a third-party company. Third-party companies that provide tenant referencing services can charge between £15 to £75 per tenant.
Who is responsible for tenant referencing fees?
The letting agent bares the tenant referencing costs unless it states in the agreement explicitly that the letting agent can recover its costs from the landlord for carrying out specific activities in relation to the letting of the property. The assumption will be that the fee paid by the landlord to the letting agent will cover all costs associated with letting the property.
The letting agent will then be responsible for providing the tenants with appropriate tenancy agreements based on the type of property the landlord is letting, as well as all additional and necessary documents such as:
- 'How to Rent' letter
- Gas Safety Certificate
- EPC Certificate
- EICR certificate
- Other regulatory paperwork
The letting agent is also responsible for managing the deposit under the requirements of the chosen deposit protection scheme.
The agent is responsible for the collection of meter readings prior to the tenancy commending while the landlord is responsible for any meter reading collection and submission throughout the tenancy.
Under the let-only service, letting agents can help the tenant set up monthly rent payments as well as notify suppliers of new tenant details.
Any other fees relating to the let-only service, which the agent wants to recoup should be stated in the schedule of fees which will usually be presented by the agent and attached to the tenancy agreement.
Full management service
Using a letting agent can be extremely advantageous if you have a full-time job and do not have the capacity to manage your properties.
Under a full management service, the letting agent is expected to carry out all of the above as well as rent collection from the tenants and pay this rent to the landlord net of any fees charged.
It is also the letting agent's responsibility to chase the tenant for any missed rent payments via all available means of communication until the rent is paid in full or legal action is taken. Depending on the terms in the contract, the agent will also be responsible for liaising with the utility companies as well as the local council to inform them of any meter readings and the change in tenants.
The letting agent is also responsible for carrying out property inspections and inventory checks at the end of a tenancy and calculating the costs of any damages, if any, prior to releasing the deposit back to the tenant.
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Typical letting agent fees
Letting agents typically charge a fee for their services, which can be paid in several ways:
- as a percentage of the rent
- as an upfront one-off fee that covers the entire tenancy period
Letting agent fees for a let-only service
A let-only service will cost less than a full property-managed service. Usually, agents will charge the landlord a flat fee for finding the tenant however some agents do charge a monthly percentage of the rental income. The amount a landlord is charged can vary drastically depending on the city, whether it's a central location or remote, the type of the property, the number of tenants and other factors.
Rentaround, a letting agent comparison website, conducted research on the fees agents in London charged for finding tenants. When charging a flat fee the payment can vary anywhere between as little as £100 to over £1,000. Letting agents that charge a percentage of the monthly rent can charge anywhere between 5% to 10% and some charge a percentage of the first month's rent.
Property Management Fees for landlords
For property management, letting agent fees will be slightly higher due to the increased workload relating to managing a property.
Usually given that a property management service is ongoing, letting agents tend to charge a percentage of the monthly rental income. Again this varies between 5% to 20% depending on how comprehensive the service is.
Guaranteed rent scheme
Some letting agents offer a guaranteed rent service which is available to landlords at a charge. In 2021, according to the English Private Landlord Survey, only 29% of landlords reported not having any tenants in rent arrears. This makes the rent guarantee service attractive to many landlords, especially during the cost of living crisis.
Losing a job, bankruptcy, illnesses, and relationship breakdowns are just some of the factors that can lead to a tenant falling behind on their rent. Under the guaranteed rent service, landlords receive the agreed rental income for a fixed period, every month, even if the tenant has failed to pay. The burden to chase rent collection, take care of evictions and attend court on behalf of the landlord would remain with the letting agent.
Government guidance on letting agent fees
Under the Consumer Rights Act 2015, Section 83 "Duty of letting agents to publicise fees" explains that letting agents must "publicise details of the agent's relevant fees". The legislation instructs letting agents to show their fees on their website or at the agent's premises to make their services more transparent to landlords.
Banned letting agent fees
The Tenant Fees Act 2019 came into place to ban certain fees charged by letting agents. Such fees include references, administration, credit and immigration checks. It also limited other fees like tenancy deposits, holding deposits, and fees to amend the tenancy agreement.
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