Whatever next?

[Adam Powell]

I run a lettings Agency in London, and very pleased following the High Court decision in the OFT vs. Foxtons court case.

We don't charge "Renewal Fees" - If we do no work, we don't expect to be paid! and took great pleasure in advising our Landlords that these type of immoral fees can no longer be hidden in the small print of contracts. (Do not hesitate to delete this condition from the contract if an Agency tries to force a renewal fee on you - they will be unlikely to contest you on it, as they cannot be confident a court would enforce payment).

However, it has come to my attention that a growing number of big High-Street Agencies are intending to employ the following tactic:

They Let your property for 12 months.

After 10 months, they contact the Tenants directly and attempt to get them to give notice on current property, as they have a better/cheaper flat available for them to move in to.

So they rent new property to the old tenants, and then rent the old property again to new tenants, and can thus charge Landlord for new Letting Fee!

Is this even Legal?

Does anyone have any thoughts on how to combat this threatened tactic?

[Vanessa]

Hi Adam,

Great to see you posting on here - my favourite and most trusted North London letting agent! (www.csenseworks.co.uk).

I think what you describe is a natural reaction of businesses who are in desperate straits, or maybe just plain greedy?

I am not sure what we can do about it, other than to contact the tenant directly and ask them why they are leaving, and if there is anything we can do to persuade them to stay.

I also think this shows even more how important it is to due due diligence on a letting agent and ask people for recommendations of good and reputable ones.

There is also a new on-line service called Rate My Agent which you can read about here. I actually tried to write a testimonial for YOU on there, but was unable to make the website work. I think it has some teething problems but it is a good idea.

In desperate times, people will do more and more desperate things to get money, so we must all be on our guard and do full diligence on any company before we give them our business.

[Amanda]

Having had several bad experiences with agents, I now ask them to forward names and telephone numbers of new tenants, as well as putting a hard copy of the tenancy agreement in the post to me.

I then call the tenants and introduce myself. I give them my number and ask them to call me directly should they have any problems with the agent.

If the agent contacts me saying that something needs to be repaired, I authorise the repair. When done, I ring the tenant to ensure they are happy. I also enquire about the agents response time and the general service they receive.

Due to what I consider to be extortionate renewal fees, I let the tenancy revert to a periodic tenancy. In light of your comments, I’ll contact the tenants three months before the tenancy is due to expire (i.e. before they announce they are leaving), and discuss the situation with them. I may discuss what the agent may try to do.

Looking at it from the tenants’ point of view, would a tenant want to move home every six or twelve months? If your property is competitively priced what is the scope for undercutting? If you provide a good quality accommodation and a high service level would they give that up to save a few quid each month?

Amanda

[SurreyLets (Sally Asling)]

Hi Adam

Its in Surrey too! I am coming accross this tctic again and again. Like you, mu agency does not charge renewal fees. However the only way I see of changing this (it will be slow but sure) is my my examples (and yours) gradually getting more well known. After all, its the larger corporates doing this, and I am not so sure in a few years they will be existing in the same format anyway. I always inform LLs from day one of practices that go on and encourage all Landlords to build a relationship with their client tenants and therefore agents cannot get away with this.

The more of us that blog and post about this, the more the search engines will pick up on it, the more LLs will read about it, and I belive that is all part of the cycle that will start to change the industry forever!

Kind wishes

Sal x

[Tessa Shepperson]

Many thanks for raising this point which I agree needs airing. I have done a blog item here http://landlordlaw.blogspot.com/2009/07/letting-agents-instead-of-r... which set out the agent's legal duties under agency law, and suggests a legal remedy for the landlord.

[Tessa Shepperson]

It might be an idea if ARLA could be persuaded to make a statement on this practice. Sally - do you know if they would do this?

[Christian Metcalfe]

Excellent blog post by Adam and follow-up by Tessa. Thanks.

Tessa Shepperson said:

Many thanks for raising this point which I agree needs airing. I have done a blog item here http://landlordlaw.blogspot.com/2009/07/letting-agents-instead-of-r... which set out the agent's legal duties under agency law, and suggests a legal remedy for the landlord.

[Benjamin]

The OFT did not over rule renewal fees, it was concluded that renewal fees are to be clearly stated in comprehensive language within Terms and Conditions. Foxtons reneal fees were stipulated in small print via jargon which is deemed unfair to the consumer. Also in Foxtons Terms it stated that if a tenant supplied by Foxtons were to eventually buy that property a 2.5% fee was to be charged; this again was deemed unfair by the OFT - understandably. It is totally unfair for a landlord to agree to Terms and Conditions which are not simplistically stipulated and the SAME size font as per the document.

HOWEVER

Renewal fees are totally fair if stipulated in an apparant manner, reason being - as a Letting agent, If i provide a Landlord with a tenant that resides and pays rent of £230 pw for a 3 year period I have aided that landlord in generating a total of £35,880. Thus it is fair I recieve the agreed percenteage of the rental generated.

I think this is an obvious and fair charge so long as the renewal fee is of a 'fair' rate and clearly stipulated. If a tenant signs a 3 year Tenancy Agreement, the landlord is charged in the same manner - a % of the total of the rental generated in the 3 years. Theres no argument against that, and there is absolutley no difference. Why should an agency not get paid due to a matter of coinidence?

Renewal fees is what makes the lettings industry a business, if this wasn't apparant, the fianance would not be available for alot of luxuries Landords are the benerficary of, i.e professional photographers taking professional photots, internet portals: Find a property, Right move, prime location.

To conclude the OFT did not overule renewal fees, they simply stated it has to be a fair amount, comprehensive, and clearly stated.

[John Corey]

In other words if the customer recognizes what they are paying for and signs up for the charge they are free to pay the charges. If the agent finds customer do not agree to pay and refuse to sign then the fees will start to disappear.

John Corey
Follow me on Twitter -> www.twitter.com/john_corey
www.ChelseaPrivateEquity.com/blog

[Benjamin]

Yes.

However, if the fee is reasonable, this fee should be non-negotiable, and any successful and sensible lettings agency should have a renewal fee; as long as it is 'fair'. Renewal fees are what makes the business. If the renewal fee is eradicted, there would be what appears to be a non-forseable knock-on effect. The revenue which is taken away as a result of not having a renewal fee would provoke a cut back on costs, such as online marketing, professional photos, the employment of proactive letting consultants, all of what makes good lettings agents so strong. Eradication of the renewal feet could diminsh the effectivity of good lettings agents simply because clients miscontrues this fee as greed, when in actual fact it aids the market and aids the strength of the service provided.