Here is a question to the blog clinic from Veena who is a landlord
I have used an agent for letting my property for the last 5 years it has always been yearly contracts. This time the tenant is staying on for two years and the agent has sent a bill for 7% as a renewal fee (last year was 8%).
They have had to do absolutely nothing as the rent increase was agreed at the start of the tenancy. I have just paid over £2000.00 for them to do absolutely nothing.
When I queried it with the agent, that I was not aware of this renewal fee, they send an agreement which I had signed in 2009. Surely, when they knew these tenants were going to stay on for at least two years, they should have brought this to my attention there and then rather than referring me to a document signed in 2009.
It is a lot of money for doing ‘nothing’
Your advise would be appreciated.
This is a common landlord complaint. Landlords consider that agents should not be entitled to receive a fee when they have done nothing for it.
Agents on the other hand argue that it is due to their careful choice of tenant that the landlord has a continuing tenancy with no voids.
The situation was considered by the Courts in the 2010 case of Office of Fair Trading v. Foxtons, and you will find links to the posts I wrote on this here.
The Foxtons case
The case was brought under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) and so the judgement can only be used by landlords who are ‘consumers’ – in this context landlords who are not ‘professional’ landlords.
The case concerned specifically certain clauses in Foxtons agency agreements with their landlords the most important of which was a clause regarding continuing commission where, as in your situation, the agents had not done any work as they were not managing agents and the tenant was simply staying on in the property.
The Judge held that the clause was invalid because
- It was hidden in the ‘small print’ of the agreement and had not properly been drawn to the attention of the landlord before he signed,
- It was not the sort of thing a normal landlord would expect to pay, and
- It was the sort of thing that, if the landlord was using a lawyer, the lawyer would ask to have removed
(You can see the full report and reasons here). However he did not say that renewal commission was unfair per se.
Foxtons were going to appeal the decision but later reached agreement with the OFT that they would not object to a clause which was suitably prominent and which only provided for commission for two years at a lower rate.
Your case
I suspect that your situation will be similar and it is highly likely that the clause in your agency agreement will be found to be invalid (should it be considered by a Judge) for the same reasons that the Foxtons clause was.
Things are a little difficult as you have already paid the invoice – it would have been better for you to refuse to pay on the basis that the cause is invalid per the UTCCR and the Foxtons case.
However there is no harm in writing to them saying that you have now learned that the clause is invalid (under the Foxtons case) and requesting a refund.
Alternatively, if there are any other fees due to them you could seek to offset the fee you have already paid for the renewal commission.
You would perhaps expect me to side with the letting agent but certainly not in this case. £2k is both rapacious and unfair.
This must be in London given the 2 year agreement and the sheer scale – a 7% fee equating to £2k means a rent of £2380 pcm. A figure most provincial landlords can only dream about.
After following the agent’s formal complaints procedure, this landlord should lodge a complaint with the TPO, assuming the agent is a member.
One of the many benefits to landlords of having their tenants formally renew each year/2 years is so they don’t incur agents charges. However, if they get charged the equivalent of 85% of a months rent for the privilege (as in this case) whats the point?
A nominal flat fee to cover the administrative costs incurred in putting a new agreement in place is all that is warranted.
One aspect I do disagree with this landlord about, however, is his argument that he was not aware of their charging structure. Sorry, but he had an opportunity to thoroughly review the terms of business before he signed at the outset and if he didn’t, well….. that’s why the unscrupulous get away with things.
I agree that the business terms should be read, however in this instance the business term was given and signed in 2009. There have been different tenants in the house since 2009 with break in between ,always on a yearly basis. My argument is that no terms of business was given with this tenancy of two year ,so I was not made aware in this instance. I have no problem paying a small admin fee but £2300.00 for doing absolutely nothing I believe is very
unfair, specially as they made no effort to inform me at the start of the tenancy. I will take to TPO as suggested above.