Sean's October Blog: Picking the Perfect Partner

I was recently invited to be part of a panel at a seminar at a landlord and lettings show which was discussing the merits of landlords using an agent or managing their property themselves.

The audience was a good representation of landlords, with some present using an agent for letting their properties but managing their properties themselves, some for let only and one wannabe landlord trying to decide what approach was best.

I am sorry to say, the general opinion of agents was not particularly high amongst the audience, but I was determined not to propagate agent bashing as an Olympic sport, but instead gave my view on the criteria that landlords should use to select a good agent.

I picked four considerations by which to measure an agent and suggested that whilst all the factors were important, the order of priority they looked at the criteria was also very important.

The areas, I felt that were important when choosing an agent were: How competent is my agent in knowing my legal obligations? How safe is my agent with my money? How much of my personal time will the agent save me? And - How much will it cost me?

Each individual landlord’s needs of course will slightly differ but I strongly suggested that the least important one of the list above should be the cost. I could see however that the audience was not at this stage convinced. With financial pressures on landlords constantly with them, they naturally tend to look at every penny when it comes to outgoings and naturally the price tag for agent services is a critical part of the decision process.

I am not one to lecture people on how they spend their money but I went on to explain to them why I felt that they should consider the other criteria and THEN look at the price. I noted that the recent requirements for letting agent to clearly display their fees will greatly help consumer choice but that the transactional decision they make should be driven by the rest of the research they undertake.
 

I started with the knowledge and competency of the agents they are weighing up. Lettings is becoming an increasingly complex area and in the absence of the industry being formally regulated, a landlord has to be confident that the agent will ensure that they are compliant with the law and are protecting their interests. The number of direct, indirect and relevant legislation that effects the letting of property is quite staggering. Estimates of the number of rules that need to be understood are in the region of 170 and is set to increase. In addition the process of devolution, has meant that the constituent parts of the UK are now applying different regulations. Add to that local authority rules and regulations then that is an awful lot of essential knowledge to have at your fingertips.    
 

It should therefore be a primary consideration of a landlord, that if they are not prepared to be personally up to speed with all the particular law they need, they should seriously consider using an agent. The challenge then is to find an agent that has the specialist knowledge to take on the burden of ensuring that the landlord complies with the law.

This means that you as an agent, should be demonstrating that you have the level of competence that is needed to fulfil this service. At present there is no requirement for an agent to be accredited and the Government at least in England is not pressing for regulation. It also does not mean that if have chosen not to join a trade body who provides accreditation that you have not acquired the essential knowledge through self-research or experience, however it is getting harder to keep up with all the new rules and you will need to work hard to persuade landlords that you will cover all the bases. It is to assist our members with that we at PRS try and provide as much education and information of current and future legislative changes. We also offer members the opportunity of accessing a legal helpline and strongly suggest that all firms get professional indemnity insurance because mistakes happen.
 

The next area, I talked about is safety. Regular readers of my blo, will know I strongly support the compulsory introduction of client money protection. This cover protects the landlord’s money that you as agents hold on trust. The vast number of agents take their responsibility seriously but there have been enough incidents of agents running off with rents and deposits, that in order to restore confidence in the market, making this cover mandatory is now essential. In anticipation of this coming into place, the PRS have looked to signpost our members to CMP providers and for our parent group to develop a separate product, which can provide the cover without joining a trade body.

Moving on to the issue of time, I have always been impressed with the dedication of good landlords in the time they invest in their tenants, however the job of being a professional landlord is extremely challenging and the value of finding a good agent to take on some of this burden is invaluable.

I also noted that that the vast number of landlords were not full time and have become landlords accidently.  A good number in the audience totally related to this. These landlord, literally do not have the time to do everything they need to do. I urged these landlords to ensure they get clear and comprehensive agreement with the agent that clearly lays out what they will do for their money.

One landlord challenged me on why he needed a such an agreement as he only used his agent for let only, but after I explained that he needed to ensure that all the legal criteria from EPCs to deposit protection, How to Rent Guides to Right to Rent checks and that unless he was doing all of this himself then he needed to ensure that his agent was contracted to undertake these services.

I have to say that one of the most common areas of complaints I look at is where the expectation of the landlord exceeds what the agent was contracted to do. Clear agreements makes the chances of dispute so much less. It is particularly important when advertising “fully” managed as this implies that the landlord can “let and forget”, which in reality is not the case and limitations to your service should always be highlighted and expectations managed.

This left the issue of cost, which at the beginning of the session appeared to be the number one criteria of agent selection.

In a competitive world, where price comparison is the norm, many agents believe that in order to succeed they need to undercut the others and to be fair when you are trying to establish a business then conceding a little bit of your income to attract landlords makes commercial success, however if this comes at the cost of failing to know your stuff, protect your client and provide a worthwhile service, then you will soon fall on your face and lose customers and eventually your livelihood.

If however you invest in the areas that can convince landlords that you are protecting them legally, financially and provide the service that frees up their time, you will have quality product that command a higher price and a quality product. If all agents went down this path, why would a landlord not want to use an agent!