Here is a question to the blog clinic from Lucy who is a tenant
Our letting agent is charging us £420 to renew our contract, saying that this is for “the cost of referencing, to make sure you are still in a financial position to service the rent liability and documentation charge.”
This seems excessive. What options are open to us to challenge this?
Charges by agents for ‘renewals’ have long been a vexed question. It is massively unpopular with both landlords and tenants (as some of the less reputable agents will charge a fee to both).
The better agents do not charge a renewal fee, and my understanding is that it is something which is mostly done in London.
An unjust fee
There is no real justification for a renewal fee. Unlike at the start of the tenancy, it is not appropriate for the tenant to be re-referenced. They are already in occupation of the property. In any event, the cost of referencing is considerably less than £420 (unless prices have changed dramatically since I last checked them out).
In Scotland this sort of thing is now illegal and there are calls for them to be made illegal in England too. However what should a tenant like Lucy do when a demand is made for this sort of fee?
What you can do
One suggestion is to get in touch with the landlord and have a word with him (or her). Chances are that they too have been invoiced by the agent for a ‘renewal fee’.
If the landlord doesn’t want to know, then you can refuse to pay and just stay in the property under a ‘periodic tenancy‘. Most tenants don’t realise that their tenancy will automatically run on, on a periodic basis after the fixed term ends.
Many tenancies run on quite satisfactorily for years under periodic tenancies However you will not have the additional security of a fixed term.
The worst that can happen
If you refuse to pay, what can the agents do? Well, provided you are paying your rent, the worst they can do is serve a section 21 notice on you. But they cannot actually require you to leave without getting a court order for possession first.
Getting a court order for possession will require action (and the cost of legal fees) from the landlord who will in most cases be unwilling to evict a good tenant simply because they don’t want to pay £420 to the letting agent for a renewal. So I think it is unlikely that this will happen.
You should therefore be reasonably safe in refusing to pay the fee and just staying put.
Shelter are running a campaign about unjustified agent fees so I would suggest you also complete their survey, which you will find >> here.
What other fees have readers been charged by letting agents as renewal fees?
Referencing costs less than £20 and as you say Tessa, if the tenant is good enough to warrant a renewal they are in a stronger position than they think.
I would certainly call the landlord too to get their views, because you can bet the agent is charging them something as well.
Why oh why do agents behave like this in an environment where their existence is threatened by a growing storm of dis-sastisfaction from landlords and tenants which is being picked up by government? Also against the background of cheap online agent services that will threaten their very existence? Its like holding a gun to your own head in the middle of an earthquake
I have just had an email from Lucy about this where she said
“They served us with a Section 21 at the beginning along with the tenancy agreement – it seems this is a very common tactic to prevent tenants moving to a rolling tenancy.”
Note that service of a s21 notice will NOT prevent the tenancy from continuing as a periodic after the end of the fixed term. All it means is that if they go to court the Judge will have to make an order for possession under the s21 rules.
However they will have to apply for a court possession order first for this to happen, and as I say, I doubt the landlord will want to evict a good tenant just because they don’t want to pay the letting agents £420.
Last year I attended the court users group of one of our local county courts. The judges, for once smiling with a cup of tea instead of snapping at me, said that they are seeing a rash of cases where the landlord and more commonly their agents, serve section 21 when the tenant moves in, before they have had the chance to protect the deposit, which they have 30 days to do. This obviously scuppers the notice
The names… the names… ‘…constant affordability assessment fee.’ Even they are paying the rent. Oh also – they want tenants to ‘afford’ the rent? Don’t hike it every 6 months, then!
As an agent I would point out 2 things, firstly if the landlord has rent and legal insurance there will be a requirement to reference tenants to enable the policy to continue and secondly I find that more tenants and landlords are now asking for the security of a fixed term rather than periodic tenancy – tenant knows what the rent will be for coming 12 months and landlord has peace of mind that property Is occupied and rent should be coming in every month. There is a cost involved for agents – not £420 but a cost nevertheless
Relevant points Jeremy but as you say the cost isnt £420.
I dont agree on your point about the tenant knowing what the rent will be for the next 12 months. A landlord would commonly raise the rent upon expiry and that would be binding for 12 months whether the tenancy was fixed term or periodic anyway
“Jeremy
January 14, 2013 | 6:05 pm
As an agent I would point out 2 things, firstly if the landlord has rent and legal insurance there will be a requirement to reference tenants to enable the policy to continue
Can you state which policy this is (preferably with a link to their T&C’s)
“and secondly I find that more tenants and landlords are now asking for the security of a fixed term rather than periodic tenancy”
That is surprising, I find that far more tenants and landlords prefer periodic, (although I am not a letting agent).
“The worst that can happen.
If you refuse to pay, what can the agents do? Well, provided you are paying your rent, the worst they can do is serve a section 21 notice on you. But they cannot actually require you to leave without getting a court order for possession first.”
Perhaps also be a bit wary about asking the landlord/letting agent for a reference in future.
Getting a court order for possession will require action (and the cost of legal fees) from the landlord
Which is tax deductable for the landlord and if successful, court costs can be claimed from the tenant.
@HB Any eviction has to be done by the LANDLORD.
Why on earth is it to his advantage to go through all the bother of evicting a tenant and then finding a new one (for which he will have to pay a new tenant find fee to the agent) simply because the tenant does not want to pay a renewal fee of £420 to his agent?
So far as costs are concerned, the most he will be able to claim in standard cases is about £244 which is FAR less than the costs of the solicitors acting.
If he does the work himself he will normally only be able to claim the cost of the court fee.
Why on earth is it to his advantage to go through all the bother of evicting a tenant and then finding a new one
I didn’t claim it was to the landlords advantage. I simply pointed out that the costs are tax deductable and the court fees can be claimed from the tenant if successful.
But if you are asking why landlords go through all the bother of evicting a tenant then finding a new one, it is because they are acting on the ‘professional’ advice from their letting agent. If letting agents are managing to scam a £420 renewal fee or fees for setting up a new tenancy it is certainly in their own advantage- at least in the short term.
An added little twist is charging £40 a time for providing future references. Which rubs salt in the wound if they instigated the tenant’s eviction in the first place.