Understanding Property Management Companies
If you’re thinking about using a property management company, there are some important things to understand to make sure you select the right property partner.
What do property management companies do?
Agents handle everything from advertising rental properties and conducting viewings to screening tenants and executing tenancy agreements. This includes managing tenant inquiries, concerns, and ensuring a smooth tenant-landlord relationship.
Maintenance and Repairs
Property management companies are responsible for the upkeep and maintenance of the property. This involves routine maintenance, addressing out of hours emergency repairs, and coordinating with contractors to resolve any property-related issues.
Rent Collection and Financial Management
The agents manage the financial aspects of property management, such as setting and collecting rent, adjusting rent as per market conditions, and financial reporting to the landlord.
Legal Compliance and Administration
They ensure that the property adheres to all relevant laws and regulations, including safety standards and landlord-tenant laws. This also involves administrative tasks like lease renewals, terminations, and maintaining property records.
To minimize vacancy periods, property management companies effectively market the property through various channels, creating compelling listings and leveraging digital marketing strategies.
They often oversee the management of utilities, ensuring that services like water, electricity, and gas are properly set up and maintained for tenants.
Property management companies handle security deposits, ensuring they are correctly collected, stored, and returned in compliance with the Tenancy Deposit Protection scheme. This safeguards both the tenant’s and the landlord’s interests.
Inspections and Property Evaluations
Regular property inspections are conducted to ensure the property is well-maintained and to identify any necessary repairs or improvements. This also helps in maintaining the property’s value over time.
At Purple Frog, we provide all of the above services, in addition to Asset Management for our clients, advising them the best ways to improve, market and manage their property assets to improve their returns.
Are property management companies regulated?
Anyone can set up a letting agent or property management company in England and Wales without any qualifications; must however comply with a number of regulations. The key ones are:
Register with a redress scheme
All agents must be registered with a redress scheme such as The Property Ombudsman and The Property Redress Scheme. The agencies must display the name of the redress scheme they are registered with on their website and in their office. The redress scheme will arbitrate any complaint on behalf of a tenant or landlord where the companies complaints procedure has been exhausted.
Client Money Protection
Companies that collect or hold funds on behalf of their clients, such as rent or deposits must have CMP insurance and display information about this insurance. Client money protection is a form of insurance that protects the landlords and tenants’ money held by a letting agent. If the money is misappropriated, lost, or stolen or if the agent goes into administration, landlords and tenants can contact the agent’s client money protection provider to make a claim for compensation.
Consumer Protection from Unfair Trading Regulations (CPRs)
These regulations prohibit unfair commercial practices that can harm consumers. Letting agents and property management companies must provide clear, truthful information about properties and services, and not mislead tenants or landlords. Any important information that the average consumer needs to make an informed decision must not be omitted.
Transparency of Fees
Under these regulations, letting agents and property management companies are required to display a comprehensive list of their fees, charges, and penalties in a visible place, like their website or office. This is to ensure that consumers are fully aware of any costs involved before they enter into a contract.
For assured shorthold tenancies in England and Wales, agents and landlords are required to protect tenants’ deposits using a government-approved tenancy deposit scheme. This is to ensure that tenants get their deposit back at the end of the tenancy, provided they meet the terms of the tenancy agreement, don’t damage the property, and pay their rent and bills.
Estate Agents Act 1979
While primarily focused on estate agents, some aspects of this act also apply to letting agents and property management companies, especially in terms of handling clients’ money and providing specific information in writing.
General Data Protection Regulation (GDPR)
These regulations require property management companies and letting agents to handle personal data legally and securely. They must be transparent about how they use client data and ensure its protection against unauthorized access or loss.
How do property management fees work?
Understanding how property management fees work is key to making informed decisions about your real estate investment. Property management companies charge fees for their services, which are typically structured in one of several ways:
Percentage of Rent Fee: The most common fee structure is a percentage of the monthly rent collected. This rate varies depending on the services included. This fee covers the day-to-day management of the property, including tenant interaction, rent collection, maintenance coordination, and more.
Tenant Placement Fee: This is a fee charged for finding and placing a new tenant in the property and is normally between 50%-100% of one months’ rent The charge covers the cost of advertising the property, screening tenants, conducting viewings, and finalizing the lease agreement.
Additional Services Fees: In addition to the day to day management of the tenancy, agents will also charge fees for additional services such as, deposit protection, inspections, issuing legal notices to tenants etc.
Are property management companies fees tax deductible in the UK?
Yes, in the UK, property management fees are generally tax-deductible. This means that landlords can offset these costs against their rental income when calculating their taxable profit. Here’s a brief overview:
Rental Business Expenses: Property management fees are considered a legitimate expense of running a rental company. As such, they can be deducted from the rental income you receive, reducing the overall taxable profit.
Inclusion in Tax Returns: When completing your self-assessment tax return, you should include property management fees as an expense. This includes fees for tenant finding, rent collection, property maintenance coordination, and other standard management services.
Record Keeping: It’s important to keep detailed records and receipts of all property management fees paid. These documents are necessary for accurately reporting your expenses to HM Revenue & Customs and for any potential audits.
Why Purple Frog?
We believe that property investment works best when we provide tenants with the properties they really want, and look after them like they deserve.
Wherever you are on your property journey, we can help you achieve your goals.
Whatever the property asset type, residential, student, commercial, PBSA, HMO, build to rent, or co-living, and wherever it is across the UK, our team of property experts can help you to make a success of your investment.
Happy tenants: We’ll look after your tenants as if they were our own. We’ve got a 4.5/5 start rating on Trust Pilot with over 1,500 reviews.