View Full Version : Agents' charges for renewal of tenancy
02-03-2005, 11:05 AM
I use an agent to obtain tenants and consider their commission of one month's rent to be perfectly reasonable when the work they do for me involves marketing the property, arranging viewings, obtaining references, preparing an inventory, preparing a brand new tenancy agreement and ground notices, collecting the first month’s rent and setting up a standing order for future rent payments.
However, they charge the same commission i.e. one month's rent to renew a tenancy i.e. when the same tenants decide to renew for a further period. This seems unreasonable to me when all they have to do is print off last year's tenancy agreement and ground notices, change the dates, get the tenants to sign and distribute copies. Note that I use them for letting only - I manage the property myself.
I would be interested to know if this is common industry practice; do others' agents operate on the same basis? Are there any agents on these forums who can comment and put your side of the argument?
02-03-2005, 12:50 PM
No it isn't but some agents will always try it on! Why bother to renew the tenancy agreement in the first place - it only gives them a further 6 months security of tenure. If no new tenancy agreement is signed, the the old one continues as a statutory periodic tenancy, you can change the rent if you want (giving at least a month's notice and doing so no more frequently than once a year). If you wish them to leave, you need to give them at least two month's notice and they can leave by giving you one month's notice.
As I am always saying, I make it perfectly clear to my agents that a tenant finding service is just that - end of story! In my experience the best agents are old established estate agents who seem to know the business backwards, have nothing to prove, are happy to accept their one off fee and have no objection to doing business on this basis.
I have recently installed a new tenant in one of my properties found for me by such an agent who I have just visited to collect initial rent and deposit moneys. He was moaning that he had no more rental properties on his books at the moment and loads of potential tenants ringing him up due to his reputation. Last time he found me a tenant, this agent did particularly well for himself. I gave him the property details and he just happened to be selling a house for a client who wanted to continue in the rented sector. Said client proved an acceptable tenant, so agent was able to pocket his full fee without advertising and had only one viewing to conduct. I have no objection to that!
02-03-2005, 12:58 PM
Further thought: If your agent wants to charge you a full month's rent to renew a six month tenancy agreement, then he is expecting fees of two month's rent per year. This works out at a commission of 16%! Most property agents only expect to charge in the region of 10% for a full management service.
Tell him to take a running jump!
02-03-2005, 13:34 PM
Just to clarify, the tenancy agreement - both the one that's about to expire and the new one - are for 12 months (with a six month break clause), not 6, so the commission isn't quite as steep as 16% - but still steep enough!
Are there any disadvantages to letting the tenancy continue as a statutory periodic tenancy? Do all the terms of the previous tenancy agreement regarding tenant's responsibilities etc continue to apply? I apologise if this is all covered elsewhere. I haven't been able to find a specific article on the site on this subject.
02-03-2005, 16:45 PM
The statutory periodic tenancy has identical terms and conditions as the AST it replaces except that the tenant now can give one month's notice that they wish to terminate the agreement and the landlord must give at least 2 month's notice. If you wish to increase the rent (fixed under the original AST unless a rent review clause was included) you can do so under clause 13 of the housing act. This has never given me problems, but is the only disadvantage of this form of tenancy. The increase has to be notified on the correct form and it gives the tenant the right to appeal against the increase to a rent committee. This will compare the proposed new rent to market rents for similar properties charged in the locality and will rule accordingly. If however you present your tenant with a new AST at the end of their old one at a new rent, they can't do this. They have to sign the new lease, agree to pay the new rent or take two months notice to depart.
02-03-2005, 17:37 PM
To J Noles:
If your contract [known as the terms of business] with the agent was for a let only service they cannot make any charge to "renew" to exisiting tenants. The drawing up of a new agreement is as you say fairly simple and the OFT would take a dim view of this racketeering.
You have no obligation to the agent unless you have given them express instructions to renew the AST and the agent had advised you IN ADVANCE in writing of such charges before accepting them. Didn't happen did it? Thought not!
As P Pilcher has stated you didn't have to do anything if you didn't want to [he talks about a rent increase in his first post by giving a month's notice to do so which is actually incorrect] and you could have just let it continue on a periodic tenancy.
What's this about a 6 months break clause? Don't like that one little bit as it's probably unenforceable unless correctly included under a "special tenancy conditions" clause and agreed by both parties in advance [and documented as such] of its signing.
:( This agent sounds like a lot of other incompetents to me!
02-03-2005, 20:17 PM
Many thanks for your further comments. A further question: does there have to be anything in the initial fixed term tenancy agreement to say that the tenancy will become periodic if a new tenancy is not drawn up?
Paul F., in response to the points you make:
1. If your contract [known as the terms of business] with the agent was for a let only service they cannot make any charge to "renew" to exisiting tenants. The drawing up of a new agreement is as you say fairly simple and the OFT would take a dim view of this racketeering.
The terms of business letter covered let only and let and management options, specifying details of each and with a section to be completed at the end indicating whether I wanted their let only or letting and management service. Given this does your view that they have no right to charge still stand? If so could I ask what your view is based on i.e. is there something on this in the Housing Act 1988 or somewhere else (but see also my response to your point 2 below)?
2. You have no obligation to the agent unless you have given them express instructions to renew the AST and the agent had advised you IN ADVANCE in writing of such charges before accepting them. Didn't happen did it? Thought not!
Their approach is to send out a letter to both tenant and landlord a few weeks before the tenancy is due to expire asking whether each wants to renew. Obviously if I sign and return this letter I am giving them instructions to renew (I guess!). I think their charges have been advised in advance in that they are in the terms of business letter referred to above. The relevant section reads "Should the Tenant(s) remain in the property for a further period after the expiry of the initial tenancy term the additional fees due to us will be in accordance with the rate already set out in this letter" [i.e. one month's rent].
3. As P Pilcher has stated you didn't have to do anything if you didn't want to [he talks about a rent increase in his first post by giving a month's notice to do so which is actually incorrect] and you could have just let it continue on a periodic tenancy.
4. What's this about a 6 months break clause? Don't like that one little bit as it's probably unenforceable unless correctly included under a "special tenancy conditions" clause and agreed by both parties in advance [and documented as such] of its signing.
It is in a "Special conditions" section of the agreement and reads: "Break Clause: The landlord to give not less than two months notice from month 4, the tenant to give not less than two months notice from month 4 in writing to terminate the term hereby created in line with the Housing Act 1988." What's your view on the enforceability of this?
Many thanks both for your advice and comments.
26-03-2012, 18:31 PM
I have the same issue and intend to dispute this tenancy renewal however the estate agents is claiming that I have signed a terms of business document by way of saying that I agree to the renewal. They are asking for £850 for doing absolutely nothing. There is no mention of a renewal in the tenancy agreement but do I have to pay this if I have signed a 'terms of business' agreement?
26-03-2012, 21:13 PM
Look if there is a renewal of a fixed term and the agent is drafting a new tenancy agreement then you would have to pay but £850 is ridiculous. You could easily instruct the agent to allow it to continue on a statutory periodic tenancy and that should cost you nothing.
If you signed a TOB then you should have a copy, if not ask for one. If it was some time ago then it might not pass the "Foxtons" test (see many posts on OFT v Foxtons). Any renewal fees must be prominently displayed on the fornt page preferably. If they are hidden and this £850 fee is not obvious then you can point to it and tell the agent you will defend it on the basis of a potential unfair term; also tell them you are referring it to Consumer Direct under the UTCCRs 1999.
26-03-2012, 22:24 PM
Thanks Paul. Massive help. I have indeed requested the TOB that I may have signed when my tenant moved in a year ago. The £850 is 8% of the annual rent which they claim they are 'doing me a deal' on as it is a reduction on the 10% I paid for the first year. Laughable. As you suggest I will allow it to continue on a statutory periodic tenancy.
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