Letting Agent Contract – Can you tell me how to terminate my contract with my letting agent? The contract has been running for 5 years, but I am now unable to afford the 15% commission I am being charged. There was nothing in writing.
This is a common question we get asked at LandlordZONE. Landlords often wish to terminate their letting management contract, either because they feel the agent is not doing a good job, they cannot afford the fees, or the landlord just decides they have enough experience to do their own management.
A let-only arrangement automatically terminates when the letting is complete, so in those cases there is no problem, providing the landlord has not agreed to anything in a written contract with the letting agent regarding renewals, renewal fees etc.
The Foxton’s case ruling had a bearing on renewal fees but only in as much as these should not be unreasonable, with no hidden terms tucked away in the small print.
Where a written contract exits between the landlord and his/her agent the landlord has already agreed to any terms in the agreement and providing they are reasonable, will be contractually bound by them.
In the case of a management arrangement it is usual for landlord and agent to agree by means of a formal contract, though sometimes it is the case that no written agreement exists.
Every written contract should include a termination clause stating what action is required by either party to terminate. Again, this must be reasonable.
However, when the contract is verbal there are no specified termination rules, renewal fees etc – it’s just an opened ended arrangement where the landlord is expected to continue paying management fees.
If it came to a legal argument a court would normally decide what contractual terms should be implied given the actions of the parties and what is reasonable in the circumstances given normal business practice.
It should be borne in mid that when a written contract has been agreed on an on-going basis, usually until the tenancy ends and the tenant leaves the premises, the parties will be bound by it.
If therefore the landlord decides he would like to get out of his obligations early, which he most obviously agreed to in the first instance, then this must be by mutual agreement. Usually, this would entail either the agent allowing landlord “off the hook” as it were, gratis, or else agreeing a compensation fee – in other words the landlord buys himself out.
Difficulties arise where the agent has taken and protected the deposit, has an ongoing relationship with the tenants by collecting rent, carrying out periodic inspections and maintenance work, and holds all the important documents – tenancy agreement, deposit details, gas certificates etc.
Therefore it would be difficult for any landlord in these circumstances to unilaterally end the contract without mutual agreement, by simply refusing to pay fees etc.
If the landlord were to do that there is a chance the agent would sue the landlord and a court would most likely enforce the contract against the landlord, allowing the agent court costs and damages.
Of course a reputable agent (one that’s guided by a professional code of conduct by being a member of one of the leading agents professional bodies) would most deal with the situation professionally to protect his local reputation. However, not all agents are so guided and it’s then that a landlord will find out just how professional the agent is that he has chosen to represent him.
In ending a contract early, a reasonable period of notice in writing would usually be considered appropriate, at least one month, along with any agreed compensation to the agent for future earnings foregone.
Landlords should bear in mind when agreeing contracts with their agents that it’s best to have it in writing and caveat emptor – buyer beware – read the small print, negotiate terms before signing if you are not happy, and ideally deal only with agents of repute. Look for agents who are members of one of the recognised professional associations and The Property Ombudsman Scheme.
Bear in mind that letting agent redress schemes are now available to landlords who have complaints against agents who are unreasonable.