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Does the Foxtons case say landlords in let only agreements do not pay for renewals?

housesHere is a question to the blog clinic from Sarah who is a landlord.

Do I have to pay my letting agents a surprise renewal fee as we are ‘let only’ in light of the Foxtons findings?

I contacted my letting agent as the 12 month contract for our tenant was coming to an end. We have a let only service and had paid them what we thought was a one off finders fee for originally finding the tenant (9% of annual rental income).

I asked whether we could suggest a rent increase and he advised me not to. I was going to negotiate the contract directly with the tenant as we manage and do the rent collection.

A few days later I was contacted by the LA contract renewal team who suggested they would renegotiate a 12 month renewal contract. No-one mentioned the option of a rolling contract, of any fee for doing this work and this was never explained in our initial terms and conditions.

I have now been sent an invoice for 9% of the annual rental £2300 following the signing of an addendum.

I would be very grateful for any advice as I understand the Foxtons ruling (i’ve been researching) stated that renewal fees needed to be made very clear (they weren’t) and it seems extortionate that we pay them anything let alone the same fee for doing nothing.

I may seem naive but I had been expecting an admin charge for the paperwork along the lines of initial referencing charges etc.

Please let me know what my rights are in this situation, I have questioned this with the agents who have said they will consider a reduced 7% fee if it is paid in full!

I want to start here by saying that although the law does provide some protection for landlords, they do need to watch out for their own interests and not just blindly expect things to work out as they want.

For example you should:

  • READ your agency agreement. What does it say about renewal commission? This is the first thing any legal advisor will want to know. In fact it is impossible to advise properly without sight of the agency agreement.
  • Be clear about the terms and payment structure before you agree to any work being done. When the agents contacted you about renegotiating the contract, this would be the time to ask them if they were going to charge for this and if so, how much.

Letting agents are a business, out to earn money. They do not do things for free out of the goodness of their hearts. If they did that they would go out of business!

If you do not agree a price for something before they do it you are asking for trouble.

There is no general rule which says ‘letting agents are not allowed to charge for their work on dealing with renewals in let only agreements’. It will ALWAYS depend on the particular circumstances of the case.

The Foxtons case

Now in the Foxtons case, the Judge did find there that the Foxtons agreement being used at that time (and it has now changed) was unfair.

This was because the renewal commission clause was buried in the body of the agreement where an ordinary landlord would be unlikely to see it. The Judge also felt that the commission rate was too high and the open ended nature of the clause was unfair on landlords.

However the Office of Fair Trading later reached an agreement with Foxtons that they would not object to a commission clause which was reasonably apparent to landlords when they signed the agreement, and which was for a lower rate of commission for up to two years only.

Your case

Looking at your situation, you have not told me what your agency agreement says about renewals other than the fact that you do not consider it to be very clear.

It may be that the clause in your agency agreement would be deemed to be unfair and therefore void under the Unfair Terms in Consumer Contracts Regulations, as the Foxtons clause was. I can’t really say as I don’t know enough about it.

However its not as if the agents just fired an invoice off without doing anything at all (as apparently happened here).  They did deal with the renewal of the tenancy and you agreed to them doing this before they did it.  So you can’t say that they are making a charge for nothing.

If you are pretty sure that your situation will fall into the Foxtons category then you need to write and tell them this.

Perhaps make a ‘without prejudice’ offer to pay them what you think is reasonable, and say that if they do not accept this offer, then they will have to take you to court – at which time you will defend on the basis of the Unfair Terms in Consumer Contracts Regulations 1999 and the Foxtons case.

They may not want to risk their terms and conditions being scrutinised by a Judge and may try to reach agreement with you. However you do run the risk of their calling your bluff and issuing court proceedings.

Before doing anything therefore you may want to consider getting some further legal advice on the validity of any clauses in your agency agreement.

Buffer

Important note. If you are reading an old post, remember that the law may have changed since it was written.




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2 Responses to Does the Foxtons case say landlords in let only agreements do not pay for renewals?

  1. No wonder letting agents are coming in for a drubbing at the moment. In the case of this particular agent it would seem to be wholly justified.

    In the event the agency agreement was silent on the subject of renewal fees, then indeed the price should have been agreed at the point the agent offered to undertake the work. I agree with your “see you court” advice. As I’ve said before, a nominal flat fee to cover administrative costs is all that is warranted for a straightforward tenancy renewal.

  2. It is rare that a letting agent’s terms does not mention a percentage ongoing commission, but admittedly not unheard of. You should look carefully at the commission clause which may say that it continues for renewal and extensions. In that case it is covering the renewal.
    Provided the terms of business does cover this then you are unlikely to be able to argue that it is unfair on the basis of the Foxtons case. In your case the agent carried out some work, albeit not a lot, in renegotiating the renewal which is decidedly not the case in Foxtons. Also you should be careful as there is doubt as to whether the decision in Foxtons remains good law after the decision of the Supreme Court in OFT v Abbey National & Ors




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About the post author:

Tessa Shepperson

Tessa is a lawyer specialising in residential landlord and tenant law. She runs the Landlord Law website (now in its 12th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google



The Landlord Law Blog from Tessa Shepperson

Tessa is an English lawyer specialising in residential landlord and tenant law.


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