By Steve Roulstone
A letter recently published in my Local Stafford Paper, questioned the ability for some Tenants in difficult situations to be able to rent property in the town. The blame has been placed purely with the local Letting Agents, but takes a very simplistic view of the reasons why they have struggled. There are far more factors that need to be considered before any judgement can be made, and I am going to put the case for the agent through these pages.
Law of Agency.
Here it is again! But so many Tenants do not understand that we are bound by our (legal) agreement with the Landlord to give best advise under all circumstances. I offer a quote from a recent article by David Smith of Anthony Gold Solicitors, in The Negotiator magazine ‘this means that the Agent must act in his clients interests even where that produces a harsh outcome for the other party, in this case the Tenant’ I quote because I believe his words confirm the reality of our position better than any other description I have ever heard. So if a Landlord does not want pets, we would be breaking our legal agreement if we allowed Tenants with pets to move in to a house with express knowledge that they had. Equally, if a Landlord does not wish for Tenants in receipt of benefits then, we have to obey this instruction in exactly the same manner. We are not here to be judge or to offer succour to those in need, no matter how worthy the cause. We are here to follow our Landlords instruction, to the letter!
The benefit system.
There are several areas where the Benefits system fails to deliver for the Landlord, firstly, they pay four weekly in arrears. This means that the Landlord has to find more than a full month’s rent to keep his cash flow in order. Why, when we have sufficient Tenants who are able to pay rent in advance, should we suggest that the Landlord waits for their money and only gets a percentage of it (Yes it catches up eventually but not for a full year!) when they do receive payment. It is also paid direct to the Tenant now, and, as happened in our latest case, only when the rent was two months in arrears would the Council start to communicate with us as the Agent of the Landlord and only when the Tenant agreed, would the Council pay the rent direct to us. Please tell me why, under those circumstances should we encourage acceptance of Tenants in receipt of benefits. It would be good to say this was an isolated incident, and it would also be wrong to say that problems occur with all Benefit claimants. Unfortunately for those who do respect their commitment, most do not.
Insurance.
One of the (many!) benefits of using an Agent, is our ability to have the Tenants professionally referenced. All Agents should use a referencing Company whose acceptance of the Tenants automatically places the Landlord in a position to take Landlord Insurance to protect the Rent and pay Legal expenses should they be needed. Now because the system works well and because Agents know how to manage and control debt, the policies are still available in some instances for less than £100 per year (I only quote this figure as an example, because with FSA regulations in mind, I am not able to discuss the benefits of one Company above another!) If this was a policy that was relied upon again and again by Landlords it would cost far more, so it confirms without any doubt, that the referencing system works! Finally, no Agent worth their salt should, in my opinion, operate without the ability to offer Rent and Legal Expenses Insurance. Otherwise, how can it be argued that they are giving best advice to their clients?
Guarantors.
If a Tenant does not earn sufficient income, they may need a Guarantor; this is the natural manner in which income short fallings are balanced against the Industry standards used for income calculations. However, all Guarantors MUST be able to afford the rent. Look at the situation from the Tenants point of view, if a Tenant who could not afford the rent was moved in to a property without any check at all, it could be argued very easily that the Agent or Landlord had acted without due care to the Tenant, placing them in a position where they are unable to afford the commitment they have made. No different than being oversold items on Higher Purchase! Now, if they are able to provide a Guarantor, I can see no difference (and neither can the Industry) in what they should also be able to afford! Just because somebody agrees to be a Guarantor does not mean that the Tenant is automatically protected. The legal agreement clearly confirms that the Guarantor is responsible for the Tenants short fallings which includes all financial matters involved with the Tenancy. Now again, if we just accepted people on face value and they suddenly found themselves with a bill they could not pay, have we done our duty as Agents? Under such circumstances the Guarantor could easily claim to have been unfairly treated.
Financial limits.
Finally, the rates at which affordability calculations are judged, are not the responsibility of the Lettings Industry. They are developed and run by the financial referencing organisations, from whom Letting Agents are only responsible for using their services, not the manner in which they operate. We are all faced with rules that we have to abide by that we have input into the detail would be very rare. This is one such position. But as I have indicated before, such organisations and Insurance companies are subject to the law in the FSA regulations they must abide by. What we should NOT do is blandly allow people to be referenced for a property they cannot afford.
Summary.
So, it is very easy to blame the Industry and Agents in particular, but there are wider issues and pictures that need to be considered. That these people who were the reason for writing this piece have had difficulties because they are on Disability Allowance and Housing Benefit, I say they should look to the social organisations that are supposed to help them, rather than the Industry that on the face of it would have to break several codes of conduct to accommodate them. We are not able to move people in too a property against the Landlords wishes, we cannot ignore referencing and neither can we place our Landlords in a position where they cannot take the benefits of the most basic of Industry Insurance Policies. We cannot ignore the possible implications of accepting Housing Benefit Tenants and neither should we ignore what a Tenant and Guarantor can or cannot afford. Rather than being unfair, when you consider our legal position and to whom we are responsible, that is being Professional!
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