Once again, to set the scene a little, I have a diversified property portfolio spanning four different countries, so I do need to rely on letting agents and property managers to support me. However, now and again you do find a bad apple, as with any industry. Today’s episode highlights a few cases that I have either been involved with directly or have some awareness of indirectly. In the most part, I have had good experiences with the letting agents and property managers that I work with, despite what you are about to hear. That said, I usually follow some deliberate due diligence steps before working with an agent, which has probably helped to contain the issues that I have had as small fires, rather than towering infernos.
Podcast: Play in new window | Download
Resources mentioned
Property Deal Tips & How to Reach me By Telephone
Free Dom Tokens…might be worth something one day: Dominium referral link
Link to the Podcast feedback survey
Today’s must do’s
Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
Get talking!
Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net
Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page
Transcription of the show
Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and as always, it’s a pleasure to have you join me on the show again today.
We continue with the mini-series on property horror stories, this time focusing on letting agents and property managers.
Once again, to set the scene a little, I have a diversified property portfolio spanning four different countries, so I do need to rely on letting agents and property managers to support me. However, now and again you do find a bad apple, as with any industry. Today’s episode highlights a few cases that I have either been involved with directly or have some awareness of indirectly. In the most part, I have had good experiences with the letting agents and property managers that I work with, despite what you are about to hear. That said, I usually follow some deliberate due diligence steps before working with an agent, which has probably helped to contain the issues that I have had as small fires, rather than towering infernos.
So, some letting agent and property manager horror stories up next then...
Property Chatter
Letting Agents & Property Managers – Surely, they wouldn’t do that…would they?
- From hard working to potentially overtrading into bankruptcy
I met the owner of an agency at a weekend property event and we struck up a good rapport. He was very hungry and hard-working; characteristics I genuinely admire. However, hungry can sometimes stretch into over-reaching, over-promising and potentially over-expanding too!
Essentially, we agreed to work together on one of my HMOs. All started well and in fact at times I even praised the company publicly for some of their actions. Then, it started to change…
A tenant here was letting me know that there seemed to be a new ‘three strike rule’. This is where it always seemed to take three separate reports of an incident before any action is taken. Reports of faults, repairs, ad-hoc tenant requests and even a pesky mice issue all took on average three or more written reports before they were attended to.
In short, this led to frustration and delay, not to mention, worsening property condition and tenant morale. Finally, the agent unilaterally altered the payment dates of rent transfers to me from ‘within 5 days of collection’ per our mutually agreed and written agreement to ‘within the first 5 days of the month following collection’. I objected to the additional delay in receiving my rental income and they simply called me awkward. I insisted that they stick to our original written agreement but they ignored me. I then lost my rag and served notice.
However, the bigger issues were the ones that I could not see! I had wrongly placed my trust in this agent to follow the correct legal procedures. However, after taking back the property, I discovered some things that truly disturbed me. For example, the EPC was not only out of date but was also (incorrectly) rated at F rather than the new legal minimum of E and yet they were advertising for rooms (which was illegal). Then, I discovered that the last gas safety certificate undertaken was over 2 years ago (which is definitely illegal!). I felt sick when I realised the last point, as clearly that’s a VERY serious issue and one I must clearly shoulder the blame for as well.
There were other issues, such as failing to document a new tenancy agreement at an agreed revised rent (illegal), telling one tenant that the landlord (i.e. me) had insisted on a 10% rent increase…when I was not even aware of the situation (false claim) and discovering that despite advertising membership of Property Mark (formerly ARLA), that they are not and never were members (misrepresentation).
Other issues emerged on closer scrutiny, such as the late filing of their accounts, new company formations with similar names and name changes for older companies in a smoke and mirrors exercise and even a couple of strike off notices at Companies House, which are often early indications of financial difficulty. Red flags were waving very clearly at this point…
I guess some of the most frustrating elements arose after serving notice. They simply refused to hand over the property for two months, despite me offering to pay all their fees for the notice period. The NLA and Property Mark both advised me that this was very sharp practice and unnecessary. They then had the cheek and temerity to threaten ME with legal action for using a photo they had taken of my own property in an ad to let a room that they had had vacant for several months!
It took me a month or two of hard work to stabilise the property, tenancies and compliance issues after taking back the property. It all goes to show that when someone is out building their property empire that Rome may be burning back as they do!
- Bogus works, undisclosed kickbacks and hidden ‘gotchas’ in the agreement
This next section spans several agencies and property managers over a period of years that I and people that I know have encountered, which suggests that agent problems might be more common than you might think. I have first or second-hand knowledge of the following:
- Works quoted for that were not required, such as re-plastering and an air circulation device installation costing £2,000, instead of simply educating tenants on correct ventilation and providing a £100 dehumidifier!
- Supplier kickbacks and commissions, whether disclosed or undisclosed in the agreement – a 10% to 15% handling fee is nice if you can get it; even nicer if we don’t know about it 😉
- Falsification of supplier invoices, literally changing supplier invoices to a higher amount with Tipex and a different colour pen!
- Charges for work that has not taken place, such as cleaning, inspections, repairs, etc.
- Delayed rent transfers, unauthorised deductions and cross-charges to other properties and an array of other payment related problems
- The six-month renewal fee scam, where a new tenancy is renewed with the existing tenant after six months for a further six months…with both parties charged a renewal fee…only for the same process to be repeated every six months…all despite clear instructions to renew for a year.
- Sharp wording buried in the small print – especially additional charges arising, despite being under ‘full management’ such as: letting fees, renewal fees, call outs, admin charges, references, advertising, inspections, inventories and my favourite…house sitting charges awaiting repair and utility companies! I also spot sales commissions and long-term letting agent fee lock-in periods lurking long after termination too.
- Agents spending our rent to prop up their failing business – this can happen when an agent runs into financial difficulty and then starts to either delay payment to the landlord or more likely to HMRC and Customs before finally going bust. I know an agent who told me that’s what they were doing…I have not checked they went bust but I don’t think I needed too!
I could go on…but I think it’s best to leave it there and simply look at what we can do in prevention, or at least damage limitation.
Lessons learned and steps to take to help protect ourselves
- Again, always do your research and due diligence on people you plan to work with. Check all advertised memberships independently. Also, check Companies House, The Estates Gazette and search for county court judgements on the companies, the officers and all of their related companies to look for warning signs on their financial and credit position. Check online ratings and then repeat all of this each year.
- I know it’s boring but read the bloody small print! Then ask for explanations where you are unsure or changes when things look a bit iffy. Ask what is included, what is extra and also what else they get paid for separately, such as referral fees. If you are very concerned, just walk away.
- Ask for copies of and check ALL supporting invoices for works undertaken and agree a repairs and maintenance instruction / approvals policy. For larger bills and repairs, insist on 2-3 alternative quotes, sometimes get your own to check against, or Google the cost of parts.
- Check your statements each month and reconcile these against your bank account – query anything that looks amiss.
- Maintain your own records and do not simply rely on the agent to do what they should be doing for you. Sure, in the event of something going seriously wrong, they might be sat next to you in the dock…but they might also be sat in the next prison cell to you as well!
Conclusion – I do work with some great individuals and companies in the letting agent and property management space. However, now and again, I do come across some useless or even downright criminal agents, sadly. I still have my little black book should you want to cross-check against it.
OK, that’s me done for this week. The show notes can be found over at www.thepropertyvoice.net. Or, if you want to talk about anything from today’s show, or just talk property investing more generally, email me at podcast@thepropertyvoice.net, I would be happy to hear from you!
Once again, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.