Becoming a landlord for the first time

Marvel1

Mickey666 said:

Marvel1 said:

Mickey666 said:

“It’s all a bit daunting . . . I don’t have a clue . . . I don’t plan to use an agent”
I would say those first two points are entirely understandable but the last point is going to be a big problem.  As pointed out above, there is a lot of regulation and requirements around letting a property and for around 8% of the rent I’d say paying an agent will be the best decision you could make.  They’ll handle everything for you, you won’t have the tenant ringing you up with every little problem that needs fixing, the necessary certificates will be handled automatically, etc etc.  Really - use an agent, it will buy you so much peace of mind and let you concentrate on running your life rather than running the tenancy.

However ensure you know the rules, not simply use the agent and do nothing.

Example being, I the tenant pays agent the depoist, agent does not protect the depoist.  I leave and discover deposit was not protected.  I am not coming after the agent for the depoist penatly, it will be you the landlord. 

Well yes, obviously it would be wise to use a reputable agent, but I see little point in a new landlord learning about all the letting rules and then paying an agent who should already know them.  Would you suggest learning everything about house conveyancing before appointing a solicitor to act on your behalf?

I'm not setting up a business.  As for the solicitor part, that's already been mentioned on previous posts.

Seen enough posts on here by both landlords and tenants, that the agents have no clue.

csgohan4

Mickey666 said:

I'm sure there are agents out there that 'have no clue', just as there are solicitors out there with varying degrees of (in)competence and self-selected forums posts will inevitable highlight the ones that 'have no clue', so are hardly representative.   But there are some general things that can be done in terms of due diligence before appointing anyone to do anything on your behalf, whether it be finding a letting agent, estate agent, solicitor, accountant, electrician or plumber.  To suggest that people should have a thorough understanding of whatever it is they want someone to do for them seems unrealistic in the extreme.  Sure, in an ideal world, it would be good if everyone was an expert in everything but it just isn't the case and it never will be.  That's why all these service businesses exist in the first place isn't it? 

I stand by my suggestion that the self-confessed "I haven't a clue" OP would be better off engaging a reputable letting agent with many years of experience rather than spend a considerable amount of time and effort attempting (and likely failing) to understand all the legal intricacies of letting a property for the first time. 

Estate agents that have been established doesn't mean they are well versed in the law and are a good agent. I've  let plenty of places where they try and trick you into signing extended contracts and not letting you know your own rights e.t.c or just fob you off when you have a repair request. 

Ultimately if anything goes wrong it is the person who owns the property that is liable, not the agent, so it would be in their best interests to know what their supposed to know rather than giving it to an agent and hoping they won't get sued or lose money

greatcrested

Mickey666 said:

I stand by my suggestion that the self-confessed "I haven't a clue" OP would be better off engaging a reputable letting agent with many years of experience rather than spend a considerable amount of time and effort attempting (and likely failing) to understand all the legal intricacies of letting a property for the first time. 

It's not all or nothing/ black Vs white.

There are excellent agents out there, but you have to find them.  Length of business is no guarantee. As an example, several of the largest, long-standing letting companies operate on a franchise basis. The headline agent's comapany name may have existed for decades. The franchise operator of the local branch may have 6 months experience.

So vet your agent carefully (see link below!). And yes, you'd still be well advised to educate yourself in the basics of your business. You don't need to become an expert (we and other forums are always here to help! As is your Landlords Association which is worth joining), but it really makes very good sense to become familiar with what you can/cannot do and what you must/must not do.

greatcrested

Letting agents: how should a landlord select or sack?

We see countless threads here from landlords who have had problems with their agents. This post aims to provide advice to landlords/potential landlords.

(Note that whilst many suggestions are general common-sense and apply anywhere, specific advice is based on the law as it applies in England and Wales.)

A) SELECTING A LETTING AGENT

Never assume the agent knows what they are doing, or will protect your interests. There are good agents, but equally there are some appalling ones. This can apply equally to the national chains and small independents.

Anyone can set up in business as an agent - no training is needed, there are no qualification requirements, and many have very little experience before they start. Add to that the fact that their prime motive is profit, and it can often be the case that their own interests come way ahead of the landlord's, and way way ahead of the tenant's.

Question them extensively before signing up. Make sure you are happy with their professionalism. Price should be only a minor factor in the decision-making process. A bad agent will cause as many problems, if not more, than a bad tenant.

1 Professional Bodies

Since 1st October 2014, the Enterprise and Regulatory Reform Act 2013 S83 requires letting agents in England to sign up to one of 2 schemes:

* The Property Ombudsman
* Property Redress Scheme

Additionally, check for membership of:

· Association of Residential Letting Agents
· National Approved Letting Scheme
· Association Professional Inventory Providers
-Safe Agent - Fully Endorsed

These are voluntary but are an indication of professionalism, and provide some limited additional protection.

Or less relevantly (though again an indication of professionalism):

· The NAEA
· The RICS
· The UKALA (more of a resource for letting agents than an upholder of standards)
· The NFOPP

Note that both ARLA and the NAEA have Client Money Protection schemes in case a member agent goes bankrupt. eg

The ARLA have the ability to make discretionary grants (up to pre-set limits) if you suffer financial loss due to the bankruptcy or dishonesty of the member and/or their firm...

If in doubt you can check an agent is a genuine member on the relevant website.


2 Code of Practice/Complaints Procedure

Do they have a Code of Practice? Have you been given a copy and read it? Do they have a clear Complaints Procedure? Is there an external element eg referral to Head Office if a chain, or to a Professional Body (above)?

3 What will they do

Check what they do, and what are the limits of what they do? Generally all will offer landlords 3 broad choices:

· tenant-find only; and/or
· rent collection; and/or
· full tenancy management

But this is just the starting point: different agents might mean different things by these. eg will they register the deposit as part of 'tenant-find'? Maybe, but maybe not. If they do, do you want them to? It might be better to do this yourself since you will be managing the check-out.

What does 'full management' mean? Do they charge extra or is it included, to:

* arrange annual gas report
* risk assessment (including legionella)
* arrange repairs
* do inspections
etc

Prepare a spreadsheet of tasks related to your letting, covering everything from obtaining the EPC, Gas cert, to marketing, reference/credit checks, inventory, tenancy agreement, through inspections, repairs etc etc

If your list does not have at least 50 items, it is not complete.

Then have a column where you tick those items you want the agent to do, and those you want to do yourself (+ a column to tick off as you complete them.)

Only then can you go to the agent and say

1) "I want you to do all these things?"
2) "How much will you charge for that?"
3) and make sure each item is then included in the contract you sign - so there can be no misunderstanding

Some items will need even more detail:

eg repairs. You may want the agent to deal with tenant-reported repairs, and arrange contractors. But are you giving them carte blanche to pay whatever they want to get the repairs done? Using your money? Or do you want
* to see, and authorise, all quotes before work is authorised?
* or to allow them to go ahead up to, say, £100 without consulting you? Or £500 or whatever?
* or do you want to make clear you will arrange all repairs yourself?

You must consider these things, and decide, and then get them written into the contract with the agent. Do NOT just accept the agent saying vaguely "we'll look after repairs" unless you want to give them complete freedom to spend your money, because they'll just do the repairs and deduct the cost from your rent.

Make sure you understand what extra charges there are (for you or your tenant).

And when you will receive the rent: within x days of rent date? x days of receipt? Or unspecified (ie never......).

Importantly, check how you get rid of the agent if you are dissatisfied. What does the contract say? Are you tied in? For how long? What if you sack them but keep the tenant they found? Many contracts have onerous conditions where you try to take over management yourself, or switch to another agent. Make sure you understand these conditions, and are happy with them before you sign up. If you are unhappy with the terms, either get them changed/re-written, or go elsewhere.

4 How will they treat your tenants

The way tenants are treated by the agent can directly affect the way the property is treated, the length of time the tenants stay (and thus number of voids) and the likelihood of complaints.

* Be aware that agents, landlords and related 3rd parties (eg credit vetting companies, inventory clerks) can no longer charge tenant applicant fees (from June 1st 2019). There are also limits on the size of holding deposits (which must be refundable in most circumstances) and security deposits. See Gov Guidance notes in link below.
* how will they deal with the tenants at the end of the fixed term? What options will they give the tenant? Do they charge the tenant? And/or you?
* how often will they do inspections? How much notice will they give the tenants, and how do they give it? Will they send you a report? Will they negotiate the dates/times with the tenant? What if the tenant says they want to be there but not at that time?

Finally, a good test is to ask a friend to go in posing as a prospective tenant and see how they are treated, and what fees they are asked to pay.

5) The Contract

It may sound obvious to some, but make sure you read and understand it in full before signing up. Do not be afraid to ask for it to be amended ie to delete clauses you do not like, or add in clauses you want eg specifying exactly what they will do for you (see 3 above).

You are employing them, so it is important the contract reflects what you want them to do. Contracts are often seen by lay people as somehow untouchable, but there is no reason they cannot be altered.

6) References

Ask for the names of some of the landlords on their books. Then contact them and ask if they are happy with the agent. The agent may well be reluctant to give you names ('data protection' etc!), but a good agent, with happy landlords, should be able to find at least one or two who would agree to have their contact details passed to you......

Do the same with tenants. If you can establish that tenants in properties they are managing are happy, that says a lot about the agent.

B} SACKING A LETTING AGENT

Sometimes landlords decide they no longer wish to use their letting agent. This may be to save the fee, or because they are unhappy with the service, or for other reasons. How, when and at what cost they can do so depends primarily on the contract they signed with the agent, so before doing anything, read the agent contract (not the tenancy agreement).

Usually notice is required (2 months? 4?). Often there is a clause requiring on-going fees if a tenant the agent introduced remains in the property. There may be other conditions.

The 2009 case The Office of Fair Trading Vs Foxtons Ltd in the High Court (which sets a precedent that must be followed by County Courts) ruled that a clause hidden in small print requiring on-going fees was unfair and unenforceable.

However, in any dispute over fees, remember the old adage "possession is 9/10ths of the law". You do not want to be in a position where you are trying to claim back from them rent they hold. Far better if they have none of your money, and they have to claim their fees from you.

So:
1) decide if you're going to employ a new agent, or self-manage
2) select a new agent if appropriate
3) talk to your tenant so they understand what's going on. Ideally face-to-face. Reassure them this will not affect them negatively. Reassure them their deposit is still safe. Explain future rent payment process.
4) Instruct new agent if appropriate, and agree a start date
5) WRITE to your tenants, formally confirming your chat. Instruct them (yes, INSTRUCT - you are their landlord)
a) who/how to pay future rent;
b) starting when;
c) who/how to contact with issues (repairs etc);
d) give them a new address "for the serving of notices" (LL & Tenant Act 1987)
6) Wait till the next rent payment date has passed and you've received the tenant's 1st rent payment direct (or via new agent)
7) Only then, give the old agent the required notice, in WRITING. By this point, hopefully, they have none of the tenant's rent and thus owe you nothing.
8) Your letter should also instruct them to pass you
* the(original) tenancy agreement(s), references, correspondence, inventory, gas certificates, inspection reports, Right To Rent & other documentation
* a final account, and balance of any funds they hold (hopefully £0)
* details of the tenant's deposit (this needs to be transferred into your/new agents name with the scheme holding it)
* dates the EPC, gov leaflet, Gas report etc were provided to tenants

8) check their final account. You'll need to pay their fee for the duration of the notice period whatever it is, but that can be balanced against any rent/other funds they hold of yours

If you live abroad:
If you are abroad and the tenant pays rent direct to you (as opposed to paying an agent who is in UK), then the tenants may have to deduct your tax before paying the rent. HMRC can chase the tenants for this. See HMRC (Non Resident Landlord Scheme).

You will also need arrangements in place to deal with repairs, gas inspections etc. if you are abroad. You can't expect the tenants to email you, and hope you respond, and by law the tenants must have an address in England or Wales "for the serving of notices" on you.

C) TENANTS

There is advice for tenants looking for a reputable letting agent here:

Shelter: (complaints about letting agents)

See also 'How To Rent' (gov advice).

Tenant Fees Act 2019 Abolition of most tenant fees from June 1st 2019 Gov Guidance Notes

Shelter information on 2019 tenant fees.


D) REFERENCES & OTHER LANDLORD LINKS

The Office of Fair Trading Vs Foxtons Ltd (Unfair contract terms in agency agreements)

Landlordzone: (terminating a LA contract)

Landlord and Tenant Act 1987 S48: (address for serving of notices)

Tenant Fees Act 2019 Abolition of most tenant fees from June 1st 2019 Gov Guidance Notes

Comms69

Mickey666 said:

I'm sure there are agents out there that 'have no clue', just as there are solicitors out there with varying degrees of (in)competence and self-selected forums posts will inevitable highlight the ones that 'have no clue', so are hardly representative.   But there are some general things that can be done in terms of due diligence before appointing anyone to do anything on your behalf, whether it be finding a letting agent, estate agent, solicitor, accountant, electrician or plumber.  To suggest that people should have a thorough understanding of whatever it is they want someone to do for them seems unrealistic in the extreme.  Sure, in an ideal world, it would be good if everyone was an expert in everything but it just isn't the case and it never will be.  That's why all these service businesses exist in the first place isn't it? 

I stand by my suggestion that the self-confessed "I haven't a clue" OP would be better off engaging a reputable letting agent with many years of experience rather than spend a considerable amount of time and effort attempting (and likely failing) to understand all the legal intricacies of letting a property for the first time. 

Solicitors have a baseline level of competence. That baseline is pretty high. 

Agents do not. 

No-one has said anyone needs to be an expert in everything. But when you are personally liable, you take precautions. 

martindow

Of course there are solicitors who make serious mistakes or are fraudulent.  The difference is that there is a professional body or insurance company who can provide recompense.  If an estate agent causes you a loss, you are left to chase them for compensation in theory, but if they have no money or have disappeared there is no-one to help you.

SamanthaFoster

Comms69 said:

So you dont have a BTL mortgage. Will your lender allow you Consent to Let? 
Assuming you manage to get that. Presume that you will receive zero rent.
Can you afford it?
If not, the answer is to sell at a cheaper price

yes, my BTL mortgage has been approved so I'm taking some equity out of this house to place as deposit on the new one. It will be interest only on this one and I can afford it if the house stands empty.

SamanthaFoster

Sorry it’s a let to buy, not a buy to let 

SamanthaFoster

AdrianC said:

SamanthaFoster said:

I’ve had two house sales fall through and I don’t want to miss out on the house I’m buying. My long term plan was to buy somewhere cheap to rent out so I’ve decided to rent out my house that I’m currently struggling to sell. I’ve put a lot into the house and it is in good repair. I’m releasing some equity to cover the new deposit and leaving in my original deposit. (15%) it is all a bit daunting for me and I haven’t a clue where to start. I’m just looking for tips for what I need to get/do to begin with. Things like insurance, gas safety, contracts, tax etc. I’m not planning on using an agency. Thanks 

So you mean you'll be looking at 85% LtV? You won't get a BtL mortgage at that level. Will your existing lender give you CtL?

What sort of raw yield are you looking at? What have you allowed for expenditure, voids, bad debts, maintenance costs? How long before your net post-tax income even covers the +3% SDLT on your new purchase?

Are you capable of severing your emotional attachment to the property, stopping viewing it as "my house", and starting viewing it as "an asset of my lettings business"?

Sorry I don’t understand the last part of your comment or what they stand for. But currently I owe 60k on my mortgage. I’m getting a let to buy mortgage on it for £90k, it’s worth 125k. In using the 30 grand to put a 15% deposit on my new house which is going to cost me £470 per month. The interest only mortgage on my current house is £162 each month and I can get £600 in rent for it.