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If a landlord decides to get help with managing a property, there are at least four potential options:

• Letting Only
• Letting and Rent Collection
• Full Management
• Rent to Rent contract

This course explains more about the options. It also explains the liability of both landlord and agent and the responsibilities of either party in a contract.

Scottish Agents – If a landlord uses an agent to manage his properties in Scotland that agent must be registered along with the landlord himself under the provisions of the Anti-Social Behaviour (Scotland) Act.

Welsh Agents –  If a landlord uses an agent to manage his properties in Wales that agent must be licensed along with the landlord himself and his properties being registered under the provisions of the Housing (Wales) Act 2014.

This is where an agent markets the property, advises on rent levels, finds a tenant, undertakes reference checks if required, and provides a tenancy agreement.

A letting only arrangement is where an agent markets the property, advises on rent levels, finds a tenant, undertakes reference checks if required, and provides a tenancy agreement.

Once the tenancy has started, the owner (landlord) undertakes all management of the property. The agent usually charges the landlord a one-off fee for this service, but landlords should check if there will be any renewal fees payable if the tenant stays after the end of the agreed tenancy. The amount for this type of arrangement will vary. The landlord needs to agree with the agent what deposit is to be collected, and ensure it is held in accordance with one of the tenancy deposit schemes.

The second option is where the agent finds a tenant but also collects the rent during the tenancy. Other management functions such as repairs and arranging to get possession of the property at the end of a tenancy, if needed, are still dealt with by the landlord.

The agent is likely to charge a one-off fee and then a monthly fee for collecting the rent. This arrangement may be confusing for the tenant as it is not clear who is responsible for which areas of management.

A letting and rent collection arrangement is where the agent finds a tenant but also collects the rent during the tenancy. Other management functions such as repairs and arranging to get possession of the property at the end of a tenancy, if needed, are still dealt with by the landlord.

The agent is likely to charge a one-off fee for setting up the tenancy and then a monthly fee for collecting the rent. Again landlords should check what renewal fees are payable at the end of the tenancy if the tenant was to stay on.

The third option is for the agent to act as a full managing agent. They deal with all management issues, repairs, rent collection, starting the tenancy and some steps towards ending the tenancy.

For example, they may serve notice but not take court action. This is obviously more expensive (perhaps 10% to 15% of the rent), but it is worthwhile if the property owner either does not have the time to manage the property, lacks the expertise or lives a long distance from the property.

A full management arrangement is the most comprehensive service. The agent will deal with all management issues, repairs, rent collection, starting the tenancy and some steps towards ending the tenancy.

For example, they may serve notice but not take court action. This is obviously the more expensive (perhaps 10% to 15% of the rent), but is worthwhile if the property owner either does not have the time to manage the property, lacks the expertise or lives a long distance from the property.

The landlord will need to agree with the agent what repairs the agent can do without getting permission. It is usual to have an amount agreed for low cost repairs that the agent can get done without the landlord’s permission. For example any repairs that would cost less than £200.00 would not require the agent to get the landlord’s permission, but any repairs above that cost would require the agent to obtain quotes and get the landlord’s consent before carrying out the work.  The agent will deduct the cost for repairs from the rent payments before passing the balance on to the landlord.

A rent to rent contract with an agent is a contractual tenancy where the “agent” rents the property from the landlord and then sublets it to tenants that they find. This type of arrangement normally gives the landlord a reduced monthly rent but no agent’s fees and the agent will be responsible for paying the rent even if there is a void period. The agent is then responsible for the contract with their tenant but the landlord remains responsible for repairs. These types of arrangements can work well for landlords that need a steady income and cannot afford void periods. However, it is vital to check that the agent is reputable and is a good idea to try and speak to people who have used the agent to check that they are responsible and your rent will be paid on time and the property let to suitable tenants.

• The property  is an upmarket property where the prospective tenants are more likely to deal with an agent.
• The landlord lives too far away from the property. For example lives in Aberdeen and the property is in Plymouth.
• Shortage of time. Managing or letting a property can be more time consuming than is imagined. When looking for a tenant for the property, someone need to be there to answer the phone and deal with queries. If all the caller gets is no reply or an answering machine, they will try elsewhere.
  
  • The property  is an upmarket property where the prospective tenants are more likely to deal with an agent.
  • The landlord lives too far away from the property. For example lives in Aberdeen and the property is in Plymouth.
  • Shortage of time. Managing or letting a property can be more time consuming than is imagined. When looking for a tenant for the property, someone need to be there to answer the phone and deal with queries. If all the caller gets is no reply or an answering machine, they will try elsewhere.
  • You are letting an upmarket property where the prospective tenants are more likely or prefer to deal with an agent
  • Susceptibility to stress and “hassle”.  Landlords need to be of a reasonably robust temperament to deal firmly and fairly with the occasional bad tenant. The demands involved in managing property are often unexpected, and the people that have to be dealt with do not always do what they say they are going to do. The manager may well have to get involved in court appearances. The agent can act as a useful intermediary between the landlord and a difficult tenant
  • The landlord’s management skills and knowledge. Managing a property properly requires a certain basic level of knowledge of legal requirements
  • A House in Multiple Occupation (or other property) which has a higher turnover of tenants or requires more intensive management.

Most localities have a number of agents and it can be difficult to decide which is best. The best way to select an agent is a recommendation from other landlords who are letting a similar type of property. Failing that the following pointers should be considered:

• Do they have a number of clients with similar properties? If they do, it means they are more likely to find a tenant quickly. Some agents specialise in certain types of property or tenants.
• Do they have Client Money Protection (CMP) and Professional Indemnity Insurance ? (This a legal requirement).
• Are they members of a recognised national organisation such as UKALA? When letting and managing a property, UKALA Agents commit to:

1. Agree, in writing, the terms of appointment including fee structure and other services for which additional fees may be charged.
2. Manage property in compliance with current applicable legislation.
3. Ensure that balances of rent are promptly paid over and keep detailed records of all transactions.
4. Ensure that repairs and maintenance requirements are dealt with promptly; in the case of major works, provide an estimate and consent before proceeding
5. Protect client money in a separate Client Account, and safeguard it in a Client Money Protection Scheme

Crucially, UKALA agents must adhere to the Association’s strict Code of Practice and are answerable to an independent redress scheme should something go wrong with a tenancy. UKALA agents also have access through membership to a wealth of advice and guidance some of which, by law, they must adhere to.

• Are they members of another recognised national organisation? Are they approved by the SafeAgent (formerly National Approved Letting Scheme (NALS))? This does not mean their performance is guaranteed, but it makes it more likely that they know what they are doing.
• How long have they been trading? An established local presence means they are less likely to be a firm that goes under next week. If they have been trading for some time, make sure it is indeed the same firm, and not a new firm simply using an old established name.
• Are they part of a franchise? Some agents that trade under the same name are in fact separate firms trading under a franchise. There is nothing wrong with this, and indeed it may enable a small firm to provide a better service than otherwise, but it does have implications with regard to membership of the Association of Residential Letting Agents (ARLA), SafeAgent etc. The particular branch may not be a member of ARLA just because a franchisee using the same name in another town is an ARLA member.

The term ‘agency’ is used in law to describe the relationship between the principal, (in housing this is the landlord) and the agent.

The principal agrees (expressly or impliedly consents) that the agent should act on their behalf in legal relations with third parties (in housing this is the tenant, and any other party that the agent needs to deal with in managing a property, for example workers undertaking repairs). The agent also agrees to act on the landlord’s behalf.

Where an agent is used, actions carried out by the agent on the landlords behalf are treated in law as if they had been done by the landlord. Landlords are bound by any agreement or contract made by their agent on their behalf with a third party (i.e. a tenant).

If the agent agrees to something which the landlord had not authorised, the landlord is still bound by the agent’s action, unless it is something obviously outside the authority of a normal agent in these circumstances. This means, for example, that if the agent is acting as managing agent for the property and fails to carry out a statutory duty, such as ensuring an annual gas safety inspection is carried out, the landlord will be held liable for the failure as well.

A landlord will also be ultimately liable to the tenant for the return of the deposit and will be obliged to pay this to the tenant, for example if the agent were to go bankrupt or abscond with the money.

In view of this, a landlord should be very careful when choosing an agent, and choose one who will carry out their responsibilities properly. The landlord should also be very clear when giving agents any special instructions (such as ‘no pets’ or non smokers) by putting these in writing to the agent.

If the agent has acted properly and in accordance with the agreement with the landlord, an agent will not be liable for a contract entered into on behalf of his landlord.

If the agent has acted contrary to instructions (for example allowing pets where the landlord specifically said ‘no pets’) it is likely that the agent will be liable to the landlord for any losses which may flow from this. Liability may depend, amongst other things, on the precise instructions from the landlord and subsequent correspondence or conversations.

An agent may be personally liable to the tenant if the agent has not told the tenant that they are acting for a third party and the tenant believes the agent to be the landlord. The agent is also liable in respect of claims for the deposit money where the agent has held this as ‘stakeholder’.