This week I thought I’d answer questions from landlords about how to go about finding suitable tenants.
The good news is that the London lettings market is highly sophisticated and there are some good agents around who can guide you. The bad news is that there has been a trend in recent years by agents to charge nebulous fees to both landlords and tenants for the preparation of tenancy agreements, credit referencing, and the like. Just be cautious when signing the agent’s terms of business and read everything thoroughly before signing.
Terms of Business:
An agent will expect a landlord to sign their terms of business. This document outlines that the agent will promote and market the property, find a suitable tenant, carry out all the references, prepare the tenancy agreement, arrange the inventory, and pre-tenancy clean if required and will also manage the property on the landlord’s behalf. If management is agreed, the agent will collect the rent and pay it to the landlord. If the landlord is resident overseas, the agent will also be responsible for deducting tax from the rent and paying it to the Inland Revenue. (A good lettings agent who does management and can account for every penny of rent and tax is worth their weight in gold.)
The terms of business will also specify that in the event of a renewal the agent is due a commission (usually one month’s rent) and this fee is ongoing – in other words, if the tenancy goes on for ten years, the fee is due every year for ten years. In my experience I have seen landlords object to paying the renewal fee every year and in some cases, they have refused point blank despite signing the terms! I would advise that if the landlord has a great tenant who is clean, pays the rent on time and causes no concern at all, then the agent deserves their commission year in, year out.
Once the landlord has signed the terms, the agent now has to set about marketing the property and finding a tenant. Most agents subscribe to popular property websites to list the property for rent. Potential tenants contact the agent directly via these websites. The internet is so widely used that agents favour this method the most of attracting tenants.
The agent will show the property, pass on offers to the landlord and vet prospective tenants by arranging for all the references and appropriate checks to be carried out.
A word of warning to landlords – again from my experience, I have heard of agents who throw their hands up in the air when things go wrong. In one instance, the agent insisted they had conducted an employment reference when in fact the tenant had never worked and once he had moved into the property, went on the dole and applied for housing benefits. Even though it is the agent’s job to obtain the relevant references, landlords should examine the reference and satisfy themselves that it is genuine. After all, the landlord will have the headache of removing the tenant not to mention the cost, which if it goes to court, can run into thousands of pounds.
Finally, landlords should always meet their prospective tenants- even though the agent may be satisfied with the tenant’s references, it is still wise for the landlord to ask to meet the tenant- sometimes intuition is more powerful than common sense.