Archive for the ‘Letting Agent Fees’ Category

Reservation Fees, Letting Agents and Avoiding the Void Periods

Wednesday, January 9th, 2013

LettingFocus has found some letting agents to be very frit* about taking reservation fees from tenants – and posits some reasons why.

Landlords who set out to minimise periods when a property is empty (or “void periods” in the landlord vernacular) always market the property as soon as the current tenants have given notice of their intention to leave. (Of course, it helps to have this written into the tenancy agreement).

These landlords will also be familiar with the situation where they have fully referenced checked a potential new tenant and want to let a property to them. However, the new tenancy sometimes cannot commence for say 3 or 4 weeks because the existing tenants have not moved out yet.

In these circumstances and to ensure the new tenant is not “flaky”, the landlord will reasonably want the new applicant tenants to sign a Reservation Agreement confirming their intentions and, as a sign of good faith, to hand over a “reservation fee” of say 2 to 3 weeks, which the would-be tenant will lose if they change their mind for any reason and fail to take up the tenancy.

This seems reasonable to us because a landlord will want to protect his losses should the applicant tenant change their minds resulting in the landlord having to face the costs of remarketing the property and the inevitable void period whilst he looks for another new and hopefully less flaky tenant.

What Reservation Agreements Should Say

Of course, for fairness the Reservation Agreement should also say:

1. In the unusual event that the existing tenant does not vacate and the incoming tenant therefore cannot take up the tenancy, then the incoming tenant will get their reservation fee back in full.

2. Providing the incoming tenant takes up the tenancy, the Reservation Fee is then deducted from the first months’ rent on move in date, leaving just the balance to pay.

Letting Agency Attitudes

But some letting agents we have dealt with are very reluctant to take reservation fees at all.

We asked the Association of Residential Letting Agents (ARLA) about this and they gave us this statement:

“ARLA advises their member to make sure that the potential tenant is fully aware of the obligations and liability to such a penalty and along with all other fees it is clear and transparent. They also remind their members of the risk of executing a tenancy if there is any doubt that the existing tenant does not move out.”

This statement seems clear enough but it doesn’t deal with the case where the property is already occupied by someone else who is due to move out soon.

Looking after the Landlord Should be the Agents Priority

Perhaps many letting agents, having already taken lots of other fees from the tenant (to help their own business cover its costs) are nervous about also asking tenants to pay a reservation fee (which, of course, goes to protect the landlord whom they are supposed to represent).

This type of letting agent behaviour could partly explain why it seems that many professional landlords (who often do most of the reference check and check-in work themselves) experience less void periods than those using a full service letting agency for the same tasks.

On Line Letting Agents

Could it also partly explain the growth of the online letting agencies, the bulk of whose business is usually heavily focused on getting landlords’ adverts uploaded onto Rightmove et al, thus allowing the experienced landlord to do the rest of the “on boarding” work (which used to be performed by full service agencies).

Disclaimer: Before I get lots of angry text and emails from letting agents, I am fully aware that not all agents act in this way. Most, still put the landlord (their client) at the heart of their business, alongside due and ongoing recognition of the rights of tenants.

* “Frit” – a word once famously used by Margaret Thatcher in the House of Commons in one notable tirade in which she used this particular piece of  Lincolnshire slang.

Stop Press: This article produced a very heated debate in favour and against my position at many sites, especially “Letting Agent Today”. Some letting agents still think a reservation fee of this type would count as a tenant deposit – with all the ramifications involved with this.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

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Posted in ARLA, Avoid Void Periods, Letting Agent Fees, Letting Agent Fees Charged to Tenants, Letting Agents, Online Letting Agents | Comments Off

Rip Off Letting Agency Fees and Tenants

Monday, September 17th, 2012

Banning landlords and letting agents from charging fees to tenants simply highlights the fact that many tenants don’t know their consumer rights. Government and local government should be doing more to help tenants and landlords know their rights instead of introducing unnecessary new legislation says David Lawrenson of www.LetttingFocus.com

Often tenants are charged for referencing, credit check and inventory costs and it is sometimes claimed that the charges frequently bear no relation to the real cost to the vendor for providing these services.

After a campaign by Shelter in Scotland, a Scottish Government consultation exercise has resulted in a decision to ban letting agents and landlords from charging any tenant fees.

Charging a fee to tenants in order to grant them a tenancy or for access to a list of properties has always been outlawed. But now all tenant charges, other than rent and a refundable deposit will be made illegal. The new law is likely to come in for Scotland in November 2012.

So, what does LettingFocus.com think of this change?

Well, Scotland has generally had a tougher regime as regards the private rented sector than England and Wales, (the only exception being protection for tenants’ deposits for assured shorthold tenancies which was only recently made law in Scotland but which has been mandatory for most ASTs south of the border since 2007).

Running Sore

The issue of the level of charges levied by letting agents has long been a running sore for Shelter and other campaigners for the whole UK for quite a while.

I am a private landlord myself and for my own properties, I usually use an online letting agent to advertise to find tenants at Rightmove et al, and then do all the reference checking, move in, inventory, tenancy signing, deposit management etc myself.

Right up front, I always point out to the tenant applicants exactly what my fees are and I don’t charge them big fees for these services. Indeed, we charge much smaller fees than the typical letting agent charges.

The fact that my charges are low and reasonable generates much goodwill with people who we hope will become our customers and rent our properties. (Often, clued up tenants actively seek out landlords who don’t use an agent for these services specifically because their fees are lower).

Double Charging – But is It Really Double Dealing?

Of course, a letting agent’s real client is the landlord – who they are also charging for the provision of letting services.

And given that the agent is also being paid by the landlord, some would argue that letting agents should not even be charging tenants anyway.

And that’s a fair point.

But there is a fair answer too.

Checking a prospective tenant’s references and running a credit check on them is there for a reason. It is to see if they can comfortably pay the rent, or not.

If the references and credit score come back with an indication that the tenant cannot afford the rent, then the effort of everyone is wasted and the agent and / or landlord has incurred costs.

So, I can see no good reason why reasonable fees cannot be charged by the agent or landlord for carrying out this particular part of the service.

As to other fees, the key issue is surely that no charge should come as a surprise to the tenant.

These are Your Rights – So Use Them

If you are buying any product or service, as a consumer, you are well advised to find out the price before you walk to a till or engage a contractor. And if the sum is significant to you, you ought to ask to have it put in writing too.

Tenant applicants as well as landlords who use agents, can and should ask any letting agent who they deal with for a statement of what fees they will be charged in connection with all the other activities that agent will perform for them – right up to signing a tenancy agreement and moving tenants in.

And the letting agent or landlord should be ready to explain clearly exactly what their fees are.

These are basic consumer rights.

Surely, the real question should be – why do tenant-applicants need special protection as they will now get in Scotland.

Government Has Failed to Tell People their Rights

The real reason is the failure of the government to tell people what their rights are: which is that tenants, just like anyone else, have a right to ask what fees they will be charged before they take out a service from a letting agent.

If they don’t like what they hear, or the agent or landlord is vague about fees, then they can just walk away and go to a more honest trader. (They may want to report the trader too.)

So, my response to government is this: Do your job and tell tenants what their rights are.

And whilst they are at it, the government should be asking the local authorities why the kind of information that I have set out here is absent from most local authority websites.

As I have said many times before – most local authorities are poor in the information that they provide to both landlords and tenants in the private rented sector.

We have consulted with and helped some local authorities to improve things. Others must now up their game.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords.

We also write for property portals, speak at property events (send an email to david@LettingFocus.com to find out about our next event) and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG click here: Blog

To read blog posts on related posts use the tags and categories at the bottom of each post (after the list of links), or over to the right of this page – where, you can click on “Select Categories” and use the pull down menu to read all the posts on any Category that interests you.

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Posted in Letting Agency Regulation, Letting Agent Fees, Letting Agent Fees Charged to Tenants, Repeat Fees Letting Agent, Repeat Letting Agent Fees, Tenants and Consumer Rights | Comments Off

Local Letting Agency Model and Councils. Can Local Authorities Make A Success In This Area

Tuesday, February 22nd, 2011

In this blog post we say that local authorities face big challenges trying to make a success of the “Local Letting Agency” concept – and we highlight the areas they will have to work hardest in if they are to be successful.

Some groups of local authorities are setting up their own local letting agencies – a topic we have written about before at this blog.

One objective of these new letting agencies will be to attract private landlords prepared to let to people on low incomes and / or Local Housing Allowance (LHA). The properties will then be advertised / made available to tenants who are in housing need and who approach the local authority for accommodation.

If the Coalition has its way, by making an offer of suitable accommodation in the private rented sector, a local authority will be able to say it has discharged its housing homelessness duty to a household. This means that in the future for most people who approach the councils for help, if they reject private rented accommodation they will not be able to remain on the social housing waiting list.

The move to set up local letting agencies is tied up with this and it follows the Rugg Review commissioned by the previous government which recommended local authorities should consider setting up local letting agencies to help facilitate this and other objectives to help them better engage with the private rented sector.

Background

Why is all this happening?

Well, obviously, there is a housing shortage. Councils do not have homes available to give to all people in housing need and so the idea is to allow them to discharge their obligations by offering tenants who are in housing need suitable accommodation in the private rented sector.

This is obviously a big political issue and there are some who work in borough housing departments who don’t like it, not least because many of them think accommodation in the private rented sector is less secure and the properties less good (but we won’t delve into that particular discussion here and we should note that there are many others in council’s housing departments who support a discharge of homeless duty into the private sector.)

And whilst some of the more experienced private landlords manage tenants who are on Housing Benefit (or Local Housing Allowance, LHA), the greater chunk of landlords are very wary of letting to people on benefits (or likely to go on benefits.)

Why Many Private Landlords Will Not Let to “Benefit Tenants”

Our analysis of the available research reveals a number of reasons given for why many private landlords and letting agent don’t like to let to tenants who are on benefits unless they are “underwritten” by a home owning guarantor:

  • Payments of LHA are always made in arrears
  • The tenants don’t always have access to a deposit
  • The government’s past decision to (in most cases) pay tenants direct and not the landlords (as was case before 2008) made landords concerned that tenants would spend the LHA payments on something other than rent
  • They think their properties will not be looked after properly and that the tenants are more likely to have “issues”
  • Local Housing Allowance applications are complex, take too long to process and when tenants’ circumstances change, the payments can stop without warning
  • Some landlords think insurers will not insure them if tenants are on LHA or that they cannot get a mortgage for a property to be used to let to tenants on LHA

Some of these concerns have some validity, some much less so. Some are true but can be ameliorated using products available from the local authorities such as “deposit bonds”.

All Change Again

Recently, the government has changed things again – reducing the level of housing benefits (introducing caps, setting payment at the 30th percentile level of local rents instead of at the median, reducing rate for Under 35s to a room rate etc.) This makes letting to LHA tenants even less attractive.

However, other recent changes have once again allowed, in many cases, for payments to be made direct to the landlord again.

So, there has been a lot of change. Indeed, there has been so much change in this area that we are sure the average private landlord is now confused and  not aware that payment can now, once again, be made direct to them in most cases where the tenant has approached the council for help.

Private Letting Agents and a Row in Wales

Also, by way of further background, it is worth noting that the majority of letting agencies nationally will not accept people on benefits. However, in some areas tenants on benefits form the majority of tenants so agents must have to deal with them. (We await some statistics from the Association of Residential Letting Agents (ARLA) on this and will add it to this blog post when we get it.)

One issue is to what extent will local authorities local letting agencies compete with private letting agencies?

One scheme in Neath Port Talbot is causing a bit of a fuss with a group of private local letting agents who claim it is undercutting their business. (See link to story below from “Estate Agent Today” at the very bottom of this post (under the links.))

Some of the criticisms made by the private letting agents will need to be considered very carefully by local authorities setting up their own local letting agencies and a big issue will be the extent to which they will compete with private letting agencies in lettings to non-LHA tenants.

LettingFocus.com

At LettingFocus.com we often work with local authorities to help them better engage with private landlords, in particular helping them understand what landlords want and how to reach them through effective marketing.

Our view is that councils are going to have to work very hard to first reach private landlords and then persuade them to make (and keep making) their properties available to tenants on low income and housing benefits.

It is doable but it is a huge challenge for the councils and from our work to date we think the really hard bits will be in reaching the landords in the first place and then delivering a quality service to them.

It’s not going to be easy for them to do this unless they learn to be marketing savvy and deliver excellent service for the landlords and tenants they are trying to help. They will need to adopt working methods that mirror the best of the best private letting agencies.

It’s possible they can, but only if they bring in new thinking from outside, including in my view, working in partnership with the best private letting agents and others who understand the private rented sector – using them to help with both the design and delivery of schemes.

We are working with some forward thinking local authorities to facilitate this.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Information and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (to Feb 2011).

Services to Businesses and the Public Sector

Primarily we are consultants to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their landlord facing or buy to let product strategies, marketing and services.

We also write for property websites and we are regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one to one basis.

AT OUR WEBSITE LETTINGFOCUS.COM:

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Posted in Deposit Bonds, Housing Benefit, Letting Agent Fees, Local Housing Allowance, Local authority Tips for Housing Departments, Marketing to the Private Rented Sector, Private Rented Sector Access Schemes, Private Rented Sector Management, Private Renting Schemes, Social Letting Agency | Comments Off

Repeat and Renewal Letting Fees and Why Landlords Should Not Wait to Claim Unfair Charges Following OFT Ruling against Foxtons

Monday, January 17th, 2011

Strangely, two consulting clients – one at a bank, the other at a local authority – both asked me the same question today: What mistakes do private landlords make most often?

This is an easy one to answer because there are two really common mistakes that amateur (and some pro) landlords make.

The first one is that, all too often, they end up with a difficult tenant or a tenant from hell. Private landlords can minimise the risk of that happening by ensuring that they, or their agent, are doing proper and thorough reference checks on would-be tenants. (And if you get tenants from some local authorities as part of a private rented sector access scheme, I would definitely recommend additional checks on the tenant.)

Bad tenants don’t like thorough reference checks and when asked to provide information about themselves will soon disappear down the road to find another more muggable landlord.

How to Do Reference Checks on Tenants

Chapter 7 of my book, Successful Property Letting How to Make Money in Buy to Let explains how to do reference checks to deter and unmask rogue tenants. It was actually the first chapter that I wrote in the book whilst I was still working as a wage slave and the original notes were actually written in the middle of a very long and very boring meeting with some Japanese software execs in Tokyo!

Read Chapter 7 and you will see how to do reference checks properly so that you can minimise risks of a bad tenant to almost zero.

If you use an agent ask them what checks they do. If they are not doing the kind of checks I describe in the book then get another letting agent before they get you a tenant from hell.

Letting Agents and Repeat Tenant Find Fees

The other mistake landlords make is related entirely to letting agents. And it is to do with green landlords paying letting agents for ongoing “finding tenant fees” years after they originally found the tenant for them.

Now, let’s be clear here, there is nothing to say that letting agents (who are not doing lettings’ management for you), cannot charge ongoing fees for the original “tenant find” years and years later -  even when you have renewed the tenancy with the same tenant and even if the letting agent had no part to play in that renewal process.

Did the Letting Agent’s Contract Make Repeat Fee Charging Arrangements Clear?

But to do this they should have made it very clear and up front in the contract you signed with them that this was what was going to happen. And you would have to have been dumb enough to sign it.

If they didn’t make this clear (or if this was hidden away in the small print or in another document say or you didn’t sign it) then you may well be able to bring a successful claim against the letting agency to reclaim unfairly charged past fees.

They will probably threaten you back with some kind of solicitor’s letter, so be brave and before you go ahead you should be aware of the law on this – which changed following the famous and very long running “Foxtons Judgment” which went all the way to the High Court.

I summarized the judgment in my old blog: http://www.lettingfocus.com/2009/07/foxtons-loses-unfair-letting-renewal.html Read this blog post and other stuff online about the Foxtons judgment before you go ahead and bring a claim.

Don’t Wait too Long to Make a Claim

But I must make an important point here – and that is Don’t Wait! Even if the suspect contract with the letting agent containing the unfair repeat fees clause is still ongoing with the agent – say, because the initial tenants are still in place, you should still act now.

Why? Because, if you wait too long it is possible it could be rejected under the Limitation Act which says you should bring claims within 6 years of the event that gave rise to a claim.

Someone very close to me recently bought a similar claim under the same Unfair Consumer Contract rules against the Scottish Life Assurance Company which is now owned by Royal London.

The background to this case was that he had an endowment policy with Scottish Life, but, because it had once been “assigned” he was refused a merger bonus of £500 when Scottish Life merged with Royal London many years later.

The claimant took Scottish Life to court on the grounds that as a policyholder he should have been made aware that if he ever assigned his policy, (even if he reassigned the policy back to Scottish Life), that he could lose out on any future merger bonus.

The claim was well made because nowhere had Scottish Life made this clear at any time and Scottish Life certainly appeared to fall foul of the Unfair Contract Terms in Consumer Contract rules. The trouble was that the merger happened over 6 years ago.

Time Barred

The claimant tried to argue that his claim could not be time barred because his endowment life policy was still running today. However, the judge decided that the event that gave rise to the claim (in this case, the merger) was over 6 years ago and statute barred – in other words, it was “out of time” and therefore too late to bring the claim.

The claimant is no fan of Scottish Life (not least due to lousy performance on the endowment part of the plan.) He was pretty pleased that Scottish Life had to expend large sums on hiring an external lawyer to attend court because the more junior lawyer was held up in Edinburgh due to snow – but he is still sad the case could not be heard.

However, the implications for landlords who feel they have suffered on unclear letting agents’ contracts are very clear. Don’t wait to bring a claim!

Are You a Pro Landlord?

Finally it is worth saying that “Professional Landlords” may have a harder time persuading a judge that they should be treated as “consumers” for these purposes and thus protected under the Unfair Contract Terms guidance (which is meant to protect consumers against companies.) A judge may tell them that as business people they should really have read the contract and all the small print!

The judge in the Foxtons case left the definition of “professional landlord” open – presumably it means people who were doing property investment and lettings full time when they signed the contract with the letting agent.  But it’s a grey area.

In the Press

My comments on a number of issues, especially to do with – 1) whether landlords should raise rents, 2) the likelihood of rents going up or not and 3) the issues facing local authorities who desperately need to improve their game when it comes to procuring properties from landlords in the private rented sector – have all received a very wide press in the last two weeks. Google “David Lawrenson” and search using a time line of “last month” to read more.

Final point on Letting Fees

By all means say “no” to repeat letting agency fees if the agent does no work in the renewal of the let. But I must make a final point on letting fees to landlords.

Too many landlords are a little too much on the “cost conscious” side. So, if you use a letting agent to find a tenant for you, including doing the reference checks and arranging and managing the check- in on move in day, you should expect to pay at least 4 weeks rent to the agent (or 6 weeks in London.) It will be more than this for a short term let or a hard-to-let property. (And expect to pay an additional fee on top for a good inventory – about £200 for a 2 bed furnished property in London is about standard.)

But don’t be mean landlord.

Let the letting agent make a living too and if you really cannot abide paying out fees for good work that’s well done, then you should do it yourself.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information and I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily we are  consultants to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them with their landlord facing or buy to let product strategies, marketing and services.

This work includes helping banks improve their buy to let mortgage lending practices and helping housing associations / local authorities procure supply of properties from private landlords (private rented access schemes, local letting agency models etc.)

We also write for property websites and we are regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a coaching basis or through our (very occasional) group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can use the tags and categories at the bottom of each post and over to the right to read blog posts on related posts OR just click on the categories and use the pull down menu over to the top right of this page.

If you want to reply:

If you are on the URL for this specific post, at the bottom of the post, you should see a space to “Leave a Reply.”

If you are on the Blog Home Page, go to the very end of this specific post and biog (i.e. after the tags) and click on “No Comments” or “Comments” which should open a Reply Box. (Spammers please note: We delete all spam.)

THE HOME PAGE OF OUR MAIN SITE click here: http://www.LettingFocus.com

For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Advice

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

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Posted in Foxtons Case, Foxtons Judgement, Letting Agent Fees, Renewal Fees Landlords, Repeat Fees Letting Agent, Repeat Letting Agent Fees, Tenant Referencing | 2 Comments »