Many landlords do not have the time to manage their properties, and therefore call on the services of a letting agent. Letting agents bridge the gap between the tenant and the landlord. They are typically responsible for vetting potential tenants, the upkeep of the property, and collecting rent each month. The services of a letting agent can be expensive, but it is often a worthwhile investment, especially if you own multiple buy-to-let properties, taking the stress away from managing the property portfolio on a day-to-day basis.
The fees charged by letting agents can vary widely, but it largely depends on the level of service you require. The two most common types of service include ‘let only’ and ‘full management’. If the letting agent is employed on a let-only basis, their main tasks are to give a rental assessment, produce letting particulars, conduct viewings, carry out tenant referencing and credit checks, provide a tenancy agreement, organise payments, and ensure the tenant has contents insurance. After the tenant has moved into the property, their work is done. Some letting agents offer additional services at an extra charge including preparing the property inventory, and checking the property has valid Energy Performance and Gas Safety Certificates. Most letting agents will charge the equivalent of a few weeks’ rent for a let-only service.
A full management service incorporates everything offered on a let-only basis, as well as ongoing management of the property in question. The letting agent is therefore the first port of call if in the event of a problem at the property. They are able to instruct approved contractors to carry out any works that may be required. Most letting agents charge a percentage of the rental income, with the average fee being around 10 per cent, which is deducted directly from the monthly rent payment.
Alternative charging models exists for landlords that require certain services but not others. An administration fee may be charged when an offer on your property has been accepted, a renewal fee is paid when the tenant renews their contract, and check-in/check-out fees are paid for inventories that are carried out when a tenant moves in or moves out. Some letting agents charge an additional end of tenancy cleaning fee for professional cleaning when a tenant’s contract ends, whilst others may charge gardens and grounds maintenance fees for maintaining outdoor spaces.
It is important to note that these fees are usually paid by the landlord, as opposed to the tenant. The Tenant Fees Act 2019 came into force in June 2019, banning fees for tenants including those on assured shorthold tenancies, student housing arrangements, and lodger agreements. However, the ban does not apply in Scotland or Wales. The only fees that letting agents can now charge tenants are a refundable holding deposit, a refundable tenancy deposit, payments to change the tenancy agreement terms, and payments for the early termination of a tenancy (if requested by the tenant).
Letting agent fees can be costly, so it is wise to shop around and make enquiries with a number of different letting agents before you agree to go ahead. There is no legal requirement to employ a letting agent, so many landlords choose to save costs by managing the property themselves. The decision will depend on whether you have the time and inclination to deal with the letting process, as well as the location of the property.
Holiday letting agent fees are a further consideration. Letting agents will usually charge commission on holiday bookings that they arrange, which can be anything from 15 to 25 per cent. It is essential that you fully understand the letting agent’s responsibilities when instructing them to manage your holiday let.
If you have any concerns, there is a trade organisation that governs letting agents called the Association of Letting Agents (ARLA). You may wish to check if a letting agent is a member of this organisation, as it will mean that they are expected to follow the code of practice.
Here at NIS we help and support letting agents with their insurance needs. If you are looking for advice on the best insurance for your letting business call our team on 01609 773 748 or request a quote today