In this article, Foxtons Director – Legal and Compliance Manjit Kataora, who has been working with Foxtons on the intricacies of legislation affecting London landlords for over 16 years, provides expert insight for landlords on using property management services. Whether you're a seasoned investor or a first-time landlord, this guide should help you make an informed decision for your rental property:
Q: Do landlords really need property management?
A: With over 150 pieces of legislation governing letting a property, the need to be up to speed on managing your let has never been greater. Fines lay in wait for those who don’t know what they’re doing, and in today’s red-tape world, being a ‘hands-off’ landlord isn’t easy or risk-free.
A good managing agent will free you up to get on with the far more important issue of your own life. They’ll cover your back on all those compliance issues. If there’s a leak, they’ll arrange for an expert to come in and quickly fix it. You can go on holiday and trust they’ll communicate with your tenant wherever you are in the world, and deal with all the admin and paperwork, so you don't have to.
But is a managing agent really necessary? In the last decade or so, the growth of online agents with simplified and stripped-back business models has seen a push to listing properties for a fixed fee, signing up a tenant, then effectively washing their hands of the entire situation, bar collecting rent (which is nothing more than checking the tenant doesn’t cancel their standing order and redirecting payment), then leaving you as the landlord or the tenant on their own.
Today, the view that you can dispense with a managing agent and do it all yourself is less viable than it ever was. It comes as no real surprise either to see this mantra being peddled by online agents who don’t offer a management service at all. And that’s before you consider the ever-changing legal landscape imposing more and more obligations on landlords.
Q: Can I claim property management fees on tax?
A: In many cases, yes. Check with your accountant to be sure for your personal tax position.
The online agent’s argument goes like this: there’s no point paying a managing agent a percentage on top of their lettings commission because you have to meet the repair costs on top anyway.
This, however, is a bit like saying that car insurance is a waste of money because you can sort out the aftermath of an accident for yourself. Unlike mortgage interest, if you’re a higher rate tax-paying landlord, both management costs and repairs can be offset against rental income for tax purposes. In other words, you might bear the outlay at the time, but both items are credited back to you in your tax return.
Far from being a waste of money, management costs are, fiscally speaking, cost-neutral and the denouncement from online agents is more to do with the fact they don’t offer management because if they did, their costs would be considerably (and unattractively) higher.
It’s a lucky landlord indeed who’s never had to face a repair or other issue with a letting. We all know that that things can and do go wrong during a tenancy: late rent payments, repair issues, misuse of the property, pets without notice or permission, subletting without notice or permission, etc, all of which without a managing agent to inspect the property and keep tabs on it mean increased risk and headache for landlords. Your online agent’s cheap fixed-cost lettings deal won’t provide much comfort if things go wrong down the line.
By contrast, not only will your managing agent be firmly by your side, but they’ll have the knowledge, expertise and contacts to get things fixed for you on time, keeping your tenants safe and keeping you free from worry. Any issues – and this is the best bit – you can pick up the phone and speak to a real person.
For tenants too, the benefits of deposit protection, client money protection, deposit dispute procedures, and someone to call if things don’t go as planned provide a level of assurance that just isn’t there otherwise.
If you want to take back your free time and enjoy peace of mind as a London landlord, enquire about our management service today.
Landlord Essentials is a series of articles where our experts delve into the big questions for London landlords. If you have a question on letting your property in London, ask a Foxtons expert. If you want help making your property a success, get in touch with Foxtons lettings team.
