Four letting agent tricks that can shrink buy-to-let returns
Out-of-control fees, bungled bills and poor service can eat into landlord investments. We expose the pitfalls to avoid when using a letting agent
Landlords should keep a meticulous record of agreed letting agent fees and maintain regular contact with their tenants
By Kate Palmer
The phenomenal growth of buy-to-let has brought a range of nasty practices by letting agents that both landlords and tenants should look out for.
Profit-making tricks used by some letting agents, who can even evict tenants who refuse to pay astronomical administration fees, can leave landlords out of pocket and tenants homeless.
In one case reported by Telegraph Money, an agency evicted all four tenants in a London property for refusing to pay a £1,260 fee for changing names on the tenancy agreement. The house was left empty after one of the tenants challenged the fee .
Even though the landlord was happy with the tenants, all four residents were evicted and the property had to be re-let.
Following our report, landlords and industry experts have come forward to share their own experiences of letting agent rip-offs . Here are some of the agencies’ slipperiest tricks .
Agent trick No.1. Evicting tenants who challenge high fees
Some unscrupulous letting agents routinely evict tenants who refuse to pay certain agency fees, typically charged for amending a tenancy agreement or for reference checks.
Any “administration costs” paid by tenants go straight to the letting agent, not the landlord, so it is in the agent’s interest to charge as much as possible.
The agency can evict tenants by issuing a “notice to leave” at the end of a tenancy period, which is legal under section 21 of the Housing Act.
This risks leaving the property empty, however, losing income for the landlord while still attracting liabilities such as council tax. There is also the possibility of damage to the property.
Landlords can reduce the chance of needless eviction by the agent by making sure their tenants know their name and contact details. Then, if anything goes awry with the agent, both parties know what is going on.
“The agent is supposed to act as a go-between, so it should not ask tenants to leave without the landlord’s instructions,” said Christopher Hamer of the Property Ombudsman, which makes final decisions in disputes involving letting agents.
This is because a tenancy agreement is a contract between the tenant and landlord, so the landlord should always decide who stays in their property.
Agent trick No.2. Letting Bungled bills and unexpected fees
Keep a meticulous record of the agent’s agreed commission on letting and managing the property, or risk being stung with unexpected fees.
An incorrect invoice, for example, almost cost buy-to-let landlord Penny Waterhouse £3,276 after her agent attempted to increase the agreed commission.
Mrs Waterhouse, a former lawyer, asked her agent, Kinleigh Folkard Hayward, to find tenants for her £1,750-a-month home in Dulwich in return for an agreed fee of 9pc of the rent over one year.
But the invoice contained a surprise charge of 11pc over two years, more than doubling the agreed price.
“They tried to raise the fee at every opportunity, even adding a charge for maintenance which I did not ask for,” said Mrs Waterhouse. “I made sure to get everything in writing.”
Penny Waterhouse received a shock invoice that more than doubled the agreed letting agent fees
Invoices issued by the agency and seen by Telegraph Money include confusing charges and incomprehensible calculations (for example, a “TA fee” is calculated as £210 plus £35 yet added up to £210).
Kinleigh Folkard Hayward said it would honour the agreed fee. A spokesman apologised for the confusion, adding that the original, lower fee was an “unfortunate error” and had been “entered incorrectly into our system”.
Landlords should be meticulous in keeping agreed commission and charges in writing. If you’ve lost money because of a bungled bill, you can take your case to a letting agent redress scheme.
A change to the law in October means that all letting agents must now be a member of one of three dispute resolution bodies, known as the Property Ombudsman, Ombudsman Services Property and the Property Redress Scheme.
If there is a dispute over charges, however, landlords can appeal only if the agent has not already launched court proceedings. Mr Hamer said: “If court proceedings have been issued, I would ask the agent to stop them, as it is not in the spirit of the agreement they have signed up to.”
Agent trick No.3. Rejecting 'perfect’ tenants
Letting agents have even been found to reject tenants who can afford to live in the property and have a track record of paying their rent on time.
Landlords risk missing out on ideal tenants by shoddy reference checking procedures, which typically cost tenants a non-refundable charge of at least £100.
In one case referred to the Property Ombudsman, an agent rejected a tenant, claiming that she had not paid one month’s rent in a previous property. In fact, the tenant had agreed with her previous landlord that her deposit would pay for the last month’s rent.
Mr Hamer said the agent “failed to thoroughly investigate the matter” and did not keep proper records.
“I was extremely critical of the agent’s actions for not keeping proper records, providing incorrect advice to their landlord client and for subsequently covering up their failings,” he said.
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Mr Hamer ordered the agent to pay £1,000 to the tenant for the distress and inconvenience caused.
Mrs Waterhouse almost lost out on a chosen tenant because of a failed reference check, which did not take into account that the tenant was self-employed.
HomeLet, a referencing firm, said the tenant “did not meet their salary requirements”.
However, a closer look by Mrs Waterhouse found that the tenant was a higher-rate taxpayer who had a two-year track record of paying comparable rent on time.
“I can’t believe I almost lost out on a great tenant because of it,” she said.
Agent trick No.4. Inflated maintenance charges
What constitutes a fair price for services outsourced to a letting agent? One landlord received a bill for £260 to replace a lavatory seat.
Adam Long owns a number of buy-to-let properties in the North West. He became so disillusioned with high fees and complex terms and conditions that he set up his own lettings company, Propeller Lettings.
“Last year I received a bill from my letting agent for £260 to replace a toilet seat. Just for clarity I mean only the bit you sit directly on, not the whole thing,” he said.
“I went to see the tenant, who was irate, as it had taken the lettings company nine months to achieve. The industry is in serious need of a shake-up.”
Richard Price from the UK Association of Letting Agents agreed that costs “clearly vary from agent to agent” but that they should reflect the cost to the business.
“There are legitimate business costs that letting agents to will look to recover,” he said. “What’s important is that they are fair and transparent from the outset.”
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