The residential property letting market is getting larger and tougher with expectations for it to keep growing for many years to come. There are now 3.2 million private rented dwellings in the UK against 2.6 million in 2001 (23% growth in 9 years). This represents 14.2% of all UK dwellings being rented privately. Still a long way behind the 90% in 1921!
With the value of property expected to increase in the long term more people will choose to rent in the immediate future as they try to make their income go further covering more and more technical toys and ever increasing lifestyle costs.
The growth in the lettings market has brought about many new lettings businesses and we should expect more to start up. Some offer a regional or national service from one office base; others offering incredibly low fees. Is there a catch? YES! How can a business based in London manage a rental property in Cambridge? How will it carry out tenant applicant assessments, routine inspections and late rent visits?
Like any business if the income doesn’t exceed the costs of operating it will go bust. There have been many letting agency failures in the past year and more should be expected. Many of these failures have hit individual landlords hard costing them £’000s reinstating monies their tenant has paid the agent but agent has failed to pay the landlord.
There are 2 groups of lettings agencies to beware of 1) unregulated and 2) unqualified inexperienced business people.
Unregulated agents are unlikely to have audited and protected client accounts. Is this an important factor? It is is absolutely critical! Why? If the agent does not have client money bonding (insurance) a landlord will be exposed to £’000’s of potential losses. Any money an agent receives from a tenant is deemed as being received by the landlord even if it hasn’t been paid to the landlord! This will include rent and the deposit; easily exceeding £1000 in one month alone.
The new Coalition government’s decision not to make regulation of letting agents mandatory has to be a real cause for concern for landlords.
All too many landlords don’t spend anytime checking the background of who they are considering dealing with. Instead they are more concerned about how much the agent charges.
What can a landlord do to protect themselves? The best advice is for landlords to only deal with an ARLA Licensed Agent. (Association of Residential Letting Agent) Members of ARLA have strict operating procedures, trained and qualified staff plus client account auditing and client money bonding.
Would you buy a holiday from an agent who is not a member of ABTA? Why would you risk even more with an unregulated lettings agent?