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Risk expert warns buy to let landlords to choose carefully

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Risk expert warns buy to let landlords to choose carefully

Written by Giuliana

Friday, 28 July 2006

Although thousands of students are about to hit the streets in search of accommodation, many landlords will see their dreams of a steady rental income shattered due to the actions of some third-rate letting agents.

Those landlords who don’t use agents need to take special care in choosing their tenants or they, too, can lose a lot of money. The warnings come from Mairi Scott, managing director of specialist risk consultants Leaseguard who provide insurance and tenant referencing services for thousands of landlords and tenants across the UK.

“Too many landlords get caught out by thinking they can just appoint a letting agent, hand over the keys, then sit back and wait for the money to roll in. Others put a postcard in a newsagent’s window, and then accept the first tenant who agrees to pay the rent they are quoting,” says Mairi Scott.

Every year many small landlords get their fingers badly burned by letting agents who are inefficient or unprofessional – or by plausible-seeming tenants who fail to pay their rent.

Choose the wrong agent and your problems can pile up faster than junk mail in a vacant apartment’s letterbox. If your agent fails to find reliable tenants you could face months with no rental income, leaving you struggling to pay the mortgage on the empty premises.

Even when a tenant is found, disputes over tenants’ deposits can lead to legal costs as landlords take action against the agent and/or the tenant to recoup loss of rent or the cost of repairing damage to the premises. Landlords could face court appearances, fines or other actions if they do not comply with housing regulation.

However, there are many good agents out there – to find one, Mairi Scott recommends that you check the quality of their service by asking the following questions:

Are they a member of a recognised industry body? These include:

Association of Residential Letting Agents (ARLA)
Association of Residential Managing Agents (ARMA)
National Approved Letting Scheme (NALS)
National Association of Estate Agents (NAEA)
Ombudsman for Estate Agents (OEA)
Royal Institution of Chartered Surveyors (RICS)
UK Association of Letting Agents (UKALA)

Are their staff trained to industry standards?
How long have they been in business?
Do they carry out tenant reference checks themselves or do they use a referencing company? Can you see some samples?
Are they up to date on legislation affecting landlords?
Do they have professional indemnity insurance?
Do they have a detailed knowledge of the local market, especially the area where your apartment is located?
What are their fees? Can they show you a list of all charges? Can they tell you, in writing, the total amount you’ll be paying?
What is their policy on holding rent and deposits on your behalf and are they a member of the voluntary Tenants Deposit Scheme?
Can they offer insurance to protect your property or a Rent Guarantee with Legal Expenses policy?

Mairi Scott also warns landlords to beware of agents whose valuation of your rental income seems too high, compared with their competitors.

If you decide not to use a letting agent, then you should choose your tenants very carefully. Before signing up a tenant, Leaseguard advises that landlords should always use a legally drawn-up Tenancy Agreement. Other things they should check with tenants include:

Are they employed on a permanent contract? Check with employer
What about affordability?
What about credit worthiness?
Self-employed? Ask to see their accounts for last three years. If not available, ask for an accountant’s reference or, if you are still not satisfied, insist on six months rent in advance.
Can you see their passport or photo driving license? Ask them to sign something, then check signature against passport or driving license.
Can you see utility bills from the last three years? (To check their last addresses)
Request a reference from any previous landlords.
If they are from overseas, can you see their work permits?

“If they are working temporarily in UK, it’s worth popping into the property now and again to check that it is not being overcrowded. I’ve heard of cases where two or three people sign up for a flat, then sub-let the couch and floors to half a dozen other people,” says Mairi Scott.

www.leaseguard.co.uk

For further information, contact: Chris Knight, General Manager, Leaseguard Ltd

Direct Tel no. 01698 368899
Mobile: 07980 626504
E-mail: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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