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Times are tough for letting agents, and tricky tenancies are an added complication that can cost you dearly if you don’t manage them effectively. As landlords increasingly feel the pinch, with their profits eroded by a reduction in tax relief and an ever increasing raft of legislation to contend with, many are choosing to manage their own rental properties. It is therefore increasingly important for agents to demonstrate their worth. Resolving issues effectively when tenancies go wrong by proactively managing the relationship with the landlord and tenant are critical to retaining the landlord as a customer.
While only one to two percent of tenancies actually do go wrong, when it happens the agent is quite likely to get the blame. So, what can you do to prevent tenancies going wrong and retain your landlord if they do?
What can letting agents do to prevent tenancies going wrong?
These are turbulent times for landlords as well as agents, with the pace of change in the private rental sector faster than it has ever been. Today’s landlords are worried about keeping up with legislation, declining yields and the impact of Brexit, as well as the more traditional concerns like tenants defaulting on their rent payments or damaging their property.
Letting agents can demonstrate their worth and counteract these concerns by providing a personal connection with their landlord. Getting to know your landlord is central to this. It is important to take the time to understand and manage their expectations when it comes to the type of tenants they would prefer to let their property to, the level of wear and tear that they consider acceptable, and your role in managing the property.
When taking on a new instruction from a landlord, it is important to establish from the outset whether a full management or let only service is most suitable. This will of course depend on the individual needs of the landlord. However, a fully managed service offers you, the agent, a greater role and responsibility for managing the relationship with the tenant, minimising the chances of the tenancy going wrong (so long as you do the job well!).
The vast majority of landlords in the UK have just one property, many are not fully up to speed with current legislation and a large proportion do not live in the same area as their rental property. While all these factors suggest that a fully managed service may be more suitable, unless you take the time to explain in detail the benefits that it offers, your landlord may not think it is worth the extra cost. It is important that your landlord understands that, with a fully managed service, you will be handling all enquiries from tenants, undertaking regular inspections of the property and possibly managing the tenancy deposit protection, in addition to all the other benefits a fully managed service offers.
Whether the let only or the fully managed service is most suitable for your landlord, a thorough referencing process is vital to ensuring that you find the right tenants for your landlord. Securing a good tenant is the most important consideration for any landlord, who simply wants their property to be well looked after and the rent to be paid on time.
A responsible letting agent will take time to find the right tenant, even if it means the property is empty for a little longer. The wrong tenant could cost the landlord more in the long term. It is important that you take the time to explain this to your landlord. Cases of illegal subletting and professional bad tenants giving false references are widely documented and agents need to be diligent on behalf of their landlords.
While most agents use a referencing company rather than carrying this out themselves, it is important to remain engaged with the process, ensure that staff review the referencing reports thoroughly and that you audit your referencing process periodically to ensure it is robust.
For more detailed information on how to reference check tenants read Hamilton Fraser’s article here.
Once you have secured a tenant through a thorough referencing process, it is a good idea to take the time to establish a rapport with them. This gives you the opportunity to gather any (relevant) information, for example whether they have next of kin nearby, which may be useful further down the line in the event that there is an issue. But most importantly, by developing a good relationship with the tenant they are more likely to contact you sooner rather than later if there are any problems paying the rent or any other issues that you need to deal with.
Explain to the tenant what they should and shouldn’t do, for example where to park, the recycling arrangements and how the appliances work. You also need to ensure that all the correct information and guidance is provided to the tenant at the start of the tenancy, so that the tenant is clear on what, when and how payments can be made. It is in your and your landlord’s interests that the tenant stays as long as possible in the property. Set a positive tone at the beginning of the tenancy and remember that small gestures like providing a bottle of wine or some cupcakes are greatly appreciated by tenants moving into their new home.
And of course, a good relationship with tenants is beneficial for recommendations.
It is a good idea to schedule a regular telephone call to the tenant, just to check in. This gives them the opportunity to raise any issues with you in a timely manner and for you to provide feedback (and hopefully reassurance) to your landlord if things are going well.
Communication and timely intervention are key to preventing small problems becoming big ones and nipping them in the bud by enabling the right course of action to be taken.
If you follow the five steps above you will have laid the groundwork for minimising the chances of the tenancy going wrong, while maintaining a good relationship with your landlord which should stand you in good stead for retaining them in the future.
What should the letting agent do when a tenant complains?
Even during good tenancies, things sometimes go wrong and tenants complain. Speed of dealing with complaints is crucial to tenants. Here at the Property Redress Scheme, 20 per cent of complaints we receive are due to poor communication from the agent. So, it is crucial to respond quickly, in writing, to register that you have received the complaint. Inform the landlord as soon as possible, but ensure that you have solutions up your sleeve along with associated costings if required. Be proactive; for example if the boiler needs replacing provide cost-saving advice.
Of course, the landlord may be reluctant to spend money, and this can be an issue for agents if the landlord routinely fails to fix problems. Inevitably this can lead to an unhappy tenant. As an agent, there may be times when ultimately you need to question whether it is worth continuing to take on landlords who persistently fail to maintain their rental property, resulting in troublesome tenancies.
Get the basics right – client money protection, redress and professional indemnity insurance
Membership of a professional body demonstrates to both tenants and landlords that you are committed to high levels of customer service when it comes to handling complaints, and that you are part of a client money protection scheme such as Client Money Protect (which as most agents are now aware will become mandatory from April 2019). In addition, as again most agents know, you must join a redress scheme such as the Property Redress Scheme. If an agent does not join a government authorised consumer redress scheme they can be subject to a £5,000 fine from the local authority and can be ultimately closed down if they continue to breach their legal requirement to join such a scheme.
Professional indemnity insurance can also help protect you as a letting agent in the event that you need to pay compensation to correct a mistake or settle a claim. To find out more about Hamilton Fraser’s bespoke professional indemnity insurance, click here.
What should the letting agent do if the tenant stops paying the rent?
Managing the relationship with the tenant from the outset and ensuring that complaints are dealt with quickly and transparently should go a long way towards preventing a troublesome tenancy. But sometimes, despite a robust referencing procedure and proactive relationship management on behalf of the agent, the tenancy goes wrong. The most common reason for this is that the tenant is struggling to pay their rent. If a tenant loses their job or falls ill, they may start delaying rent payments or, in the worst case scenario, stop paying altogether.
How you can be proactive but professional in this situation, and how do you go about trying to collect the rent if the tenant is not paying?
The key to managing this situation is to do all you can to avoid the tenant burying their head in the sand. It may just be a temporary situation, so firstly it is important to establish why there has been a delay in payment. Depending on the reason, you can discuss trying to pay off rent arrears over time, getting housing benefit or universal credit or perhaps changing the date the rent is due if an alternative timing is better for the tenant. It is always preferable to recoup some rent than none at all.
Be sure to keep clear records of any communication with your tenant regarding the non-payment of rent incase it is needed in court at a later date. Of course, if the tenant has a guarantor now is the time to contact them – they may be able to cover the rent, resolving the situation. If not and it has not been possible, through negotiation and effective communication, to identify another means of recouping the unpaid rent, the agent will need to write a letter to the tenant giving a clear time frame (usually seven to fourteen days) by which time the rent must be paid.
If they simply can’t pay, it may be best to let them break their contract and leave the property. Rent guarantee insurance is of course the best way for your landlord to ensure they are covered in this scenario. Hamilton Fraser’s rent guarantee insurance also covers legal fees whereby the landlord will be covered should an eviction process ensue. The maximum rent payable per claim is £50,000 or the equivalent of twelve months rent, whichever is the lesser amount. Don’t forget to discuss landlord insurance with your landlord at the outset of a tenancy.
What should the letting agent do if the tenant won’t leave the property?
If all reasonable attempts to recoup the rent have failed and the tenant is refusing the leave the property, you may have no option but to serve notice that you are seeking possession.
Following the Housing act of 1988 and 1996 you have two options depending on where you are within the fixed period of your tenancy agreement; a Section 8 or a Section 21 Notice. If you find yourself in the position where you need to serve notice that you are seeking possession of a property, it may be worth enlisting the help of a professional. Delays due to a mistake on the notice simply equate to more rent lost. Make sure that you use a service that is authorised by the Solicitors Regulation Authority.
Paul Shamplina, Director at Hamilton Fraser and Founder of eviction service Landlord Action, discusses the eviction process in more detail during his webinar with Right Move, ‘What to do when tenancies go wrong’. In this webinar Paul provides his view on how to ensure tenancies go well and if they don’t how to resolve the issues, as well as retaining the landlord. To listen to the webinar click here.
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Property Redress Scheme is approved by Government under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015