The importance of promoting consumer choice for letting agents

As the dust settles after the implementation of the Renters’ Rights Act, letting agents and referencing agencies are finding alternative ways to mitigate uncertainty and financial risk for landlords.

A range of services are growing in popularity that replace traditional, abolished methods like rent in advance, not least professional rent guarantor provision. This service offers reassurance for good tenants who can afford the rent but don’t quite meet the right criteria on paper, including students, self-employed people or those on benefits, or retirees.

For agents, having a trusty service provider to turn to can help to efficiently lock in a new tenancy. Agencies can and do enter into partnerships with service providers, including professional rent guarantor services such as RentGuarantor. Your recommendations can be very useful for renters using a service for the first time or those in a hurry to secure a tenancy.

Due diligence is crucial to protect your clients and customers.”

It is essential, however, that letting agents and referencing agencies promote consumer choice and fairness. Ultimately, the decision to use a service to secure a tenancy sits entirely with the renter, and it is up to the landlord to agree that it meets their requirements.

As an agent, due diligence is crucial to protect your clients and customers, whether you are making a recommendation or assessing the suitability of a service provider brought forward by a prospective tenant.

The spotlight will over time, naturally, fall on how agents, landlords and service providers are aligning with the law under new rules. This will in turn lead to refined standards and stricter expectations in regulation. So how can agents remain compliant and responsible when it comes to customer choice, and why is it so important?

Why is choice important?

We believe that agencies who do not offer a choice of rent guarantor options to prospective tenants could find themselves in breach of the Tenant Fees Act.

This could apply to situations where agencies recommend one, single choice of provider or service without any alternative. It could also apply if a prospective tenant brings in their own service provider and – for reasons that suit the agent rather than the renter or the landlord – are declined.

– Choice is good for your reputation as an agent. Empowering tenants with objective, transparent information builds trust, creating opportunities for the future and avoiding any perception of bias or that products are recommended solely for commercial purposes.

– It’s also good for your business. A range of options that best suit the requirements of the landlord and the tenancy – and the renter’s own risk profile – will more likely result in a successful application.

What makes a recommendation fair?

If a rent guarantor is required to secure a tenancy, then the renter should have the option of either a personal contact (who meets the criteria) or a professional provider. If they need or want to use a professional guarantor service, then a choice of suitable providers should be offered.

The renter must be allowed to research and choose their own service provider independently; there should be no pressure to choose only from an approved shortlist and you need to be prepared to provide valid reasons for not accepting a tenant’s choice of service provider.

– Do not suggest that any one provider is compulsory, even indirectly. Offer a shortlist of suitable and qualified providers that fulfil the needs of the tenancy.

– Provide clear, simple and comparable information on any service provider you are recommending. Help the renter understand that they are free to choose.

– Be honest about any commercial arrangements you have in place with any provider. Transparency is recommended if you receive a revenue share or commission for recommendations.

– Guide, don’t persuade!

Doing your due diligence

There has been an influx of rent guarantor providers since the Renters’ Rights Act was announced. Landlords and tenants should be encouraged to take time and care to understand the product or service they are purchasing, making sure it is fit for purpose.

Agents meanwhile, should do their own research to understand which providers they are happy to accept (or not), and the justifiable reasons why. Does the level of cover align comfortably with your responsibilities to landlords and tenants? For example, a provider may only cover rent liabilities for a limited period, which might not give the level of support that a landlord requires. It goes without saying that agency preference shouldn’t be a factor simply for commercial benefit or for convenience.

Too often, we see insurance products marketed as ‘guarantees’, which can blur the distinction between insurance and professional guarantor services. In some cases, guarantor products can appear to operate more like insurance policies.

This is particularly important given that insurance is a regulated financial service, whereas professional rent guarantor services are not. These products are not one and the same, and should be considered separately to meet different needs and requirements.

RentGuarantor has been operating since 2018 and has backed thousands of tenancies. RentGuarantor is the only provider listed on the Alternative Invest Market (AIM), part of the London Stock Exchange, and as such, is subject to rigorous governance and compliance. We’ve partnered with over 2,200 agents. Our agreements actively encourage our partners to offer choice and we provide guidance and marketing support on how to do this.