Many landlords pay managing agents to manage their lettings, hoping to avoid calls on Sunday evening from irate tenants with a broken down boiler. Generally they are looking to secure some peace of mind knowing that their tenant – and their property - will be properly looked after. But some landlords get more than they bargained for, writes Jenny Howe of law firm Vanderpump & Sykes.

The reason is that the small print of managing agent contracts often carrying terms including a right for the agent to claim commission if the let property is subsequently sold to a tenant placed by the agent; hefty fees where tenants renew tenancy agreements, even where no work or service was provided by the agent prior to the renewal.

Earlier this year The Office of Fair Trading stepped to challenge this type of practice, which is common among letting agents and perceived by some as unfair and some would say verging on profiteering. The High Court backed the OFT's challenge and found that the Unfair Terms in Consumer Contracts Regulations 1999 applied and managing contracts should therefore be subject to its provisions.

In a landmark ruling (10 July 2009) it found that charging repeat renewal commission and claiming fees (equivalent to estate agents commission on a sale of the property where the managing agent had had no involvement in negotiating the sale) were unfair. The OFT have now asked the court to issue injunctions preventing Foxtons relying on such terms.  It is expected that the letting industry, which is currently not subject to any compulsory regulation, will take the ruling on board generally and comply with it.

If you are considering appointing an agent to manage your letting, you should ensure that the agent is a member of ARLA, the Association of Residential Letting Agents. Members sign up to a code of practice and must meet certain ARLA benchmark standards before being granted membership status. You can also refer disputes to ARLA if you fall out with your agent and need an independent view. Most existing ARLA members already belong to the Property Ombudsman Service which can investigate complaints about members and make financial awards if complaints are upheld. ARLA is in the process of issuing licenses to new applicants for membership.

Joining the Property Ombudsman Service is now a condition of all joining ARLA members. It might sound like obvious, but landlords should ensure they read management contracts carefully before signing up. Agents usually offer different levels of service - from letting only - where they will generally find the tenant, obtain references and collect the rent - to full management - where they will visit the property, prepare an inventory and deal with maintenance and repair issues, as well as issuing notices to terminate the tenancy.

If you want to ensure a guaranteed rental income, ask your agent about local authority tenants. This avoids problems with private tenants whose circumstances may change leaving them unable to meet the rent. The rent will often be paid in full by the local authority and sometimes the local authority will agree to pay the rent direct to the landlord. However, bear in mind that when you want to get your property back, a local authority tenant will often be advised to sit tight in the property until you have a county court order for possession - which process can take around 3 months - because leaving before that stage will amount to making themselves homeless and not eligible for re-housing.

Also, local authorities will often pay the deposit on behalf of the tenant. The deposit will be subject to the usual rules on deposit protection (see below) so be clear about who is going to do this - you or the agent. Remember that even if you do have an agent, the ultimate responsibility to register the deposit with one of the compulsory schemes is the Landlords. Be equally clear about how the council regards the deposit. Often it will require an agent to sign an agreement stating that the deposit will be kept by the agent and returned at the end of the tenancy, which is in contravention of the rules on compulsory protection of deposits contained in the Housing Act 2004.

If you have private tenants, consider taking out insurance to guard against default in rental payments. Often these types of policy will offer cover for legal expenses if you have to issue court proceedings to recover possession or rent arrears.

Shop around for an agent you are happy with, and don't be afraid to ask them questions about deposits, service of notices and how they vet for references. Managing agents typically charge between 7-12% of your rental income so you're entitled to know what they are doing for your money.  Rents can be a useful source of income but when things go wrong, it can be costly and time consuming to get your property back. It's worth doing your homework to make sure that your property is being managed efficiently.