Landlords and tenants - necessary for a managing agent to handle client money?

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  • hazza2013
    replied
    doobrey,

    Again, I totally agree! Thanks for the reply. We will be setting up a client account and business account to make life easier and I also agree LLs would probably feel more comfortable with a monthly fee being taken as opposed to a great big chunk up-front!

    Regards

    Leave a comment:


  • doobrey
    replied
    Consistent with others I don't think your original idea would work (although nothing wrong with thinking outside the box, of course).

    LL pays agent to collect rent and chase tenants on their behalf. If agent does not receive rent themselves they are likely to end up in the middle, slightly out of the loop and often getting in the way. Agent could be contacting the the landlord frequently with 'have you received this?', 'you have to pay for that' which largely defeats the object of a management service.

    Taking commission in advance doesn't work so well if the tenant defaults.

    Nothing wrong with monthly statements IMHO.

    The current model works if properly done.

    Leave a comment:


  • ram
    replied
    Just be carefull, as a lot of landlords expect you to do everything, so if your service in that respect "Changes from the norm" you may hit problems ( with the landlord checking the rent etc )

    At present, there are 2 types of service.
    Tenant find only, which is a hard slog to find the BEST tenant in a short time.
    ( Not always the ones that earn the most money are the best )

    And the fully managed let.

    If you diviate from "The norm" as you describe, some / most / all landlords may have a problem, as they know of the two services offered, but not the one you are describing, and some may not comprehend the implications for them, and just sign with you anyway.
    Not until 3 to 5 months down the line, will they find it a bind / effort to check things themselves.

    Yes, your thinking to cut your services to keep your and the landlords costs down is good, but people do not comprehend the implications sometimes, which then causes you hassle and a disgruntled landlord.

    Best to keep it as "the norm", 2 services, but you always receive the rent on managed lets.
    If that means raising your costs to 10%, then so be it, but if you can't cover your costs the "normal" way, just like the other letting agents do, then you have to rethink - Is this viable, should we get out and try something different.

    I have done that in the past with 2 businesses, asking, Is it working, are my skills in the right place, why cant i make money like the competitors. If all else fails, find another job where "the Norm" pays.

    Leave a comment:


  • hazza2013
    replied
    Mrs Mug,

    Indeed, although we would have to help the LL renew the AST for another 6 month fixed term unless they decided to go their own way.

    I do agree though there are issues with this e.g. what if a LL was working abroad and could not check their account or have the time to do so. I think having taken into account all of your answers we would have to operate a Client Account.

    Regards

    Leave a comment:


  • hazza2013
    replied
    theartfullodger,

    Tell me about it! Rest assured, my father is MRICS and I have taken the ARLA and NAEA exams, so at least that helps fill some LLs and tenants with confidence, but certainly the learning never ends!

    Regards

    Leave a comment:


  • Mrs Mug
    replied
    Originally posted by hazza2013 View Post
    the rental payments each month would go to the Landlord's bank account directly via standing order. The client would then pay us for our services up-front for the first 6 months
    This sounds like a "Tenant find only" service to me. If I would still have to go through all the hassel of everything else, why would I bother paying you a service charge?

    If you don't handle the tenants money, how are you going to get your letting fees from me if I decide I don't want to pay you anymore after the first 6 months?

    Leave a comment:


  • theartfullodger
    replied
    Thanks:

    Re your question a surprising number of agents - not you I'm sure - seem to have had no training, no qualifications, no criminal records check, no understanding of the basics of landlord/tenant law....

    Best regards!

    Leave a comment:


  • hazza2013
    replied
    Dear Ram,

    Thank you very much for the feedback. These were my exact thoughts for a fully managed tenancy. We will go down the Client Account route I think!

    Regards

    Leave a comment:


  • hazza2013
    replied
    Afternoon theartfullodger and thanks for the reply.

    Apologies, I probably was not clear enough. So, rather than us handling client money like most agents do by taking the rent from the tenant, taking their fee, then passing the remaining rent back to the LL, the rental payments each month would go to the Landlord's bank account directly via standing order. The client would then pay us for our services up-front for the first 6 months (we would no be holding client money) e.g. 8% of £3000 if the rent was £500pcm. As mentioned by the regs that govern this area: "Fees paid in advance for professional work agreed to be performed and clearly identifiable as such shall not be regarded as Clients' Money for the purposes of these regulations"

    I hope that makes more sense. My question to those on this forum - especially LLs was whether you would begrudge the fact that we were not capable of holding Client Money and as a result the tenant's payments went directly from their bank to yours? Also the advanced payment for the 6 month period - do you have any issues with this as opposed to paying us monthly? Essentially, this means it is up the LL to check each month that the rent has hit their account as the agent will not be receiving it monthly to a client account - of course we would call the LL to remind them to check their account.

    Any other common issues both tenants and LLs have experienced with letting agents would be welcome so we can avoid these problems and better our industry.

    Kind regards

    Leave a comment:


  • ram
    replied
    If you are set up to issue A.S.T's and look after the landlords property, then you DO handle clients money.

    Usualy the terms will be - You are the letting agent, you receive the rent, you receive cheques etc if tenant damages property during the term / extended term ( Periodic ).

    I have always paid a letting agent ( and the landlord when they do not use letting agents ) so if you wre taking 8% of my £ 625 per month rent, which is £ 50 per month, I as a landlord would expect you to receive the rent then transfer it into my bank account.

    After all, you are looking after the property on behalf of the landlord. You resolve disputes, you collect the rent, etc etc etc.
    The Landlord by employing you does not want to look after the rent, advanced rent etc, that's why he pays you to do it for him.

    If you / partner are going into this with the thoughts of "Oh, all this work, we wont collect rent, we don't want to do statements", then you wont have landlords as your clients for very long.

    Leave a comment:


  • theartfullodger
    replied
    Originally posted by hazza2013 View Post
    Morning all,

    On behalf of my business partner I'm just interested in getting a few opinions on the handling of client money as an agent that deals in residential sales and lettings.

    My colleague who is about to set up has decided not to tick the box on his ARLA membership form that asks whether he will be handling client money -
    OK, his decision - if it's true...
    ..
    With regards to our low commission fees (7-8%) - we would take this fee upfront from the first months rent and invoice the LL for the 6 month fixed term period as opposed to taking it each and every month with statements galore.

    ...
    So you'd be taking and handling client money then - eg "first month's rent": Or have I misunderstood something



    If I thought an agent of mine was on the fiddle & lying I'd fire them immediately & let anyone else I knew know what I felt:

    Cheers!

    Leave a comment:


  • Landlords and tenants - necessary for a managing agent to handle client money?

    Morning all,

    On behalf of my business partner I'm just interested in getting a few opinions on the handling of client money as an agent that deals in residential sales and lettings.

    My colleague who is about to set up has decided not to tick the box on his ARLA membership form that asks whether he will be handling client money - I do agree that it can be more pain than it is worth at times, however one had to think through the options as to when it may be necessary to handle any client money. Obviously deposits from a tenant are easily dealt with as they can pass on a cheque addressed to the DPS which can be sent straight to them along with the required paperwork and forms. With regards to any emergencies at a rental property, we would cover an emergency up to a certain figure (yet to be exactly decided) rather than taking LL's money as a float.

    The only scenario we thought could be problematic was when rent payment (through standing order mandate) was due to hit one of our LLs bank accounts. Obviously if one is unable to hold client money then the rental payment goes straight from the tenants bank to the LLs bank - which speeds the transfer of payment up rather than coming to the agent which is a benefit in one sense, but what it would mean is that the agent would need to call the LL each month (2-3 days after standing order payment was supposed to be made) to ensure payment had gone through as scheduled.

    Would you, as a landlord, be happy with this service or expect the rental payment to come to a client account at the agent's first before being sent on to yourself? As a LL myself I have found it frustrating that it can take up to 10 days for the money to hit my bank from the day on which rent had been payed due to needing to go to an agent's client account first.

    With regards to our low commission fees (7-8%) - we would take this fee upfront from the first months rent and invoice the LL for the 6 month fixed term period as opposed to taking it each and every month with statements galore.

    I would appreciate both tenant's and LLs thoughts on this management structure. Any critiques would be more than welcome, as well as anything you feel current letting agents do wrong or to a poor standard that we could do to a better one.

    Many thanks,

    H

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