Sole Agency Agreements – Guaranteed Income or Landlords Held Captive?

What is a sole agency agreement? It’s when a letting agent is the only agent letting the property. It’s common in estate agency work and usually entails a reduced commission when dealing in sales. In letting, it forbids a landlord to advertise or let a property through any other channel or company apart from them.

Factotum are inherently uncomfortable with sole agency agreements as the small print can often be not in the landlord’s best interest. However, there are advantages and disadvantages to both agency and landlord.

to-sign-a-contract-2-1236630-1279x852-720x340Sole Agency Advantages

  1. Sometimes, the sole agency agreement comes alongside a guaranteed income for the landlord. In essence, the agency then becomes the tenant of the property and agrees to provide the landlord with an agreed monthly sum in return for full control of the property – whether it’s occupied or not. This can provide some peace of mind and stability for the landlord, but also gives the letting agent the opportunity to make more profit by subletting the property out for a higher amount than they are paying the landlord. Factotum do occasionally offer guaranteed lets, but it can often mean paying the landlord significantly less than market rate to cover any potential void periods. It’s also important the correct commercial (company let) lease with the owner is drawn up to include the terms of sub letting or licencing. If this is not done properly it can undo any advantage of a fixed lease period.
  2. It’s less likely to result in double booking.The more booking methods a landlord allows, the more there are to manage. Factotum encourages landlords to use our online calendar for this exact reason – to keep track of when a property is available. We also never book a let without confirming with the landlord first.

Sole Agency Disadvantages

  1. What if the agency doesn’t secure a let? By restricting the landlord to only using one agency it means that they rely on that agency to secure a let. So what if it doesn’t happen? Or if the agency can only get lets with a significant number of void days in between? Some agencies only handle long term lets, so if there are any vacant periods, the landlord cannot advertise the property for short term or holiday lets.
  2. What if the landlord wants to arrange a private let? Sole agency agreements can restrict even the landlord from using the property in-between arranged lets. If the landlord wants to rent to family, friends or other tenants that didn’t apply through their letting agency, they could be charged additional fees just to use their own property.

Factotum would always advocate transparency in the pros and cons of sole agency and flexibility in in the owner’s best interests.

So a note of caution to landlords – look carefully at the small print when you’re searching for a letting agent. The devil is always in the detail.