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Once instructed, a letting agent has a legal duty to act at all times in the best interests of their client landlord. It is very important that the contract between the letting agency and the landlord is specific regarding all the terms and conditions and is expressed in clear language. It should detail exactly what the agency will do and should set out the fee structure. Equally importantly the contract should state what the agency is not prepared to do.

Once instructed, a letting agent has a legal duty to act at all times in the best interests of their client landlord. It is very important that the contract between the letting agency and the landlord is specific regarding all the terms and conditions and is expressed in clear language. It should detail exactly what the agency will do and should set out the fee structure. Equally importantly the contract should state what the agency is not prepared to do. For example, many agencies do not want to get involved with court paperwork or serving of Section 8 Notices for rent arrears preferring to recommend a solicitor instead. In addition some agencies use in-house staff for inventories while others may use outside inventory companies. There is no “right” or “wrong” about any of this. It is a matter of the way an individual agency chooses to run its business.

From 1st October 2014 it has been a legal requirement for letting and managing agents in England to belong to a government approved property redress scheme. Failure to do so may result in a fine. The new law grants both landlords and tenants the right to independent redress if their agent cannot resolve a complaint to their satisfaction.This means that anyone who feels they get a poor deal from their letting agent will be able to take their complaint to a redress scheme.

It is usual for an agent to be given the authority to do some or all of the following:

– Sign the AST on behalf of the landlord.

– Instruct maintenance staff to carry out repairs.

– Send out reminder letters for rent arrears or other breaches.

– Carry out property inspections.

– Purchase or replace goods on behalf of the landlord.

– Deal with any problems that may occur such as sub-letting

The above list is by no means exclusive.

It is usual for an agent to be given the authority to do some or all of the following:

– Sign the AST on behalf of the landlord.

– Instruct maintenance staff to carry out repairs.

– Send out reminder letters for rent arrears or other breaches.

– Carry out property inspections.

– Purchase or replace goods on behalf of the landlord.

– Deal with any problems that may occur such as sub-letting

The above list is by no means exclusive.

Where there is an urgent matter of which the agent has become aware and the landlord cannot be contacted the agent will have a common law duty to act in the best interests of the landlord. An example would be if there was a serious leak at the property late on Xmas Eve. The charge would be obviously much higher. The agency would need to pay the tradesman for remedying the problem and claim the money back from the landlord. Not to adequately address the issue may leave the agent open to a claim of negligence form the landlord.

Where there is an urgent matter of which the agent has become aware and the landlord cannot be contacted the agent will have a common law duty to act in the best interests of the landlord. An example would be if there was a serious leak at the property late on Xmas Eve. The charge would be obviously much higher. The agency would need to pay the tradesman for remedying the problem and claim the money back from the landlord. Not to adequately address the issue may leave the agent open to a claim of negligence form the landlord.

In a recent court case where this actually happened and the landlord refused to pay, the District Judge found that the agent had acted correctly, promptly and with due diligence. It was further held that the much larger fee charged by the plumber was “reasonable in the circumstances bearing in mind the time of the year.”

The above situation also may come under the heading of “Agency of Necessity”.

However, an agent will only be covered in such a scenario if they behave in a reasonable and diligent manner. For example, if a landlord instructs an agency to find a tenant states: “…but you must discuss the details with me first before proceeding” and in defiance of this instruction the tenancy is signed up and keys are handed over then the agent will have acted ultra vires or ‘without authority’.

However, an agent will only be covered in such a scenario if they behave in a reasonable and diligent manner. For example, if a landlord instructs an agency to find a tenant states: “…but you must discuss the details with me first before proceeding” and in defiance of this instruction the tenancy is signed up and keys are handed over then the agent will have acted ultra vires or ‘without authority’.

The agency will have committed a breach of contract, a breach of fiduciary duty and be deemed to have acted negligently. In one case several years ago where this happened the furious landlord explained that the reason he wanted to check the references first was because there was a specific clause in his mortgage contract that said: ‘No students, DSS or diplomats’. By taking on students the agency had caused the landlord to breach the contract with his mortgagee with potentially serious consequences.

A tenancy had effectively been granted without the lender’s consent. The tenants will have acted in good faith because they were not aware of any of this. The landlord would well be advised to take legal advice and inform the mortgage company. It is highly unlikely that the mortgagee would commence possession proceedings against the landlord but there may be fees applied which can be claimed back from the agent. The tenants would have the protection of the Mortgage Repossession (Protection of Tenants) Act 2010 in the extremely unlikely event that the mortgagee commenced possession proceedings. It is hoped that the mortgagee, having been made aware of the situation, would grant retrospective consent to let to students or possibly apply a fee. In addition the insurance of the landlord may be invalidated leaving the agency potentially open for a claim for negligence from the landlord.

From the perspective of receiving an instruction from the landlord it could be argued that the agency were not told by the landlord about the ‘no students’ clause and were not at fault. To say this is to miss the point. A letting agent is deemed to be a ‘professional’ and the landlord the ‘amateur’. Even before the part about defying the landlord’s clear instruction is discussed, it is the job of the agency behaving with due diligence to ascertain the exact wishes and requirements of the landlord. It is always better for an agent to ‘overcommunicate’ than to ‘undercommunicate’.

An agent has a legal relationship with a landlord client not too dissimilar to that of that which exists between a solicitor and a client. If a landlord has 20 properties with an agency and has received an instruction to fully manage the portfolio then over the course of a year there will literally be thousands of pounds of the landlord’s money flowing into the agencies bank account. The agency will literally be running the landlord’s business on his or her behalf. The agency has a general duty of care and skill to act in a professional manner at all times. This would involve:

An agent has a legal relationship with a landlord client not too dissimilar to that of that which exists between a solicitor and a client. If a landlord has 20 properties with an agency and has received an instruction to fully manage the portfolio then over the course of a year there will literally be thousands of pounds of the landlord’s money flowing into the agencies bank account. The agency will literally be running the landlord’s business on his or her behalf. The agency has a general duty of care and skill to act in a professional manner at all times. This would involve:

– Ascertaining and following the client landlord’s instructions.

– Reporting back to the landlord if there any problems.

– Achieving the highest possible realistically achievable rent.

– Ensuring all maintenance staff are fully qualified.

– Checking Gas Safe qualifications have not lapsed. (Contact gassaferegister.co.uk or phone 0800 408 5577)

– Thoroughly referencing potential tenants.

– Setting up a Guarantor Agreement if necessary.

– Carrying out a full inventory at check in and check out.

– Passing on all moneys to the landlord promptly.

– Ensuring that an EPC is in place.

– Protecting the deposit within the relevant statutory period.

This duty covers not only handing over all monies which are due to the landlord within the time stipulated in the contract but to also keep full and detailed records of all financial transactions which are relevant to the business relationship between the landlord and the agent.

The landlord should be sent a clear and transparent breakdown of all monies received, commissions deducted, expenses occurred and funds due to the landlord.

This duty covers not only handing over all monies which are due to the landlord within the time stipulated in the contract but to also keep full and detailed records of all financial transactions which are relevant to the business relationship between the landlord and the agent.

The landlord should be sent a clear and transparent breakdown of all monies received, commissions deducted, expenses occurred and funds due to the landlord.

It cannot be stressed too strongly that all letting agents should ensure that they have properly documented and signed copies of all instructions from their client landlord. Many agents make the mistake of accepting verbal instructions. While it is true to say that a verbal instruction means that there is a contract in place which is legally binding on both parties the difficulty is that precise terms are not agreed and put in writing. An agent in receipt of a verbal instruction will find it hard to properly “account” to their client.

Where Agents act for non resident landlords, i.e. those whose usual place of abode is outside the UK, they must deduct tax from the landlord’s UK rental income; and pay it to HMRC’s Accounts Office.

This is called the Non Resident Landlords Scheme and Guidance notes can be found in the Additional Resources section below. These were updated in January 2015.

The Scheme is administered by HMRC’s PTI (Personal Tax International) unit.

Where Agents act for non resident landlords, ie those whose usual place of abode is outside the UK, they must deduct tax from the landlord’s UK rental income; and pay it to HMRC’s Accounts Office.

This is called the Non Resident Landlords Scheme and Guidance notes can be found in the Additional Resources section below. These were updated in January 2015.

The Scheme is administered by HMRCs PTI (Personal Tax International) unit.