Repeat and Renewal Letting Fees and Why Landlords Should Not Wait to Claim Unfair Charges Following OFT Ruling against Foxtons

Strangely, two consulting clients – one at a bank, the other at a local authority – both asked me the same question today: What mistakes do private landlords make most often?

This is an easy one to answer because there are two really common mistakes that amateur (and some pro) landlords make.

The first one is that, all too often, they end up with a difficult tenant or a tenant from hell. Private landlords can minimise the risk of that happening by ensuring that they, or their agent, are doing proper and thorough reference checks on would-be tenants. (And if you get tenants from some local authorities as part of a private rented sector access scheme, I would definitely recommend additional checks on the tenant.)

Bad tenants don’t like thorough reference checks and when asked to provide information about themselves will soon disappear down the road to find another more muggable landlord.

How to Do Reference Checks on Tenants

Chapter 7 of my book, Successful Property Letting How to Make Money in Buy to Let explains how to do reference checks to deter and unmask rogue tenants. It was actually the first chapter that I wrote in the book whilst I was still working as a wage slave and the original notes were actually written in the middle of a very long and very boring meeting with some Japanese software execs in Tokyo!

Read Chapter 7 and you will see how to do reference checks properly so that you can minimise risks of a bad tenant to almost zero.

If you use an agent ask them what checks they do. If they are not doing the kind of checks I describe in the book then get another letting agent before they get you a tenant from hell.

Letting Agents and Repeat Tenant Find Fees

The other mistake landlords make is related entirely to letting agents. And it is to do with green landlords paying letting agents for ongoing “finding tenant fees” years after they originally found the tenant for them.

Now, let’s be clear here, there is nothing to say that letting agents (who are not doing lettings’ management for you), cannot charge ongoing fees for the original “tenant find” years and years later –  even when you have renewed the tenancy with the same tenant and even if the letting agent had no part to play in that renewal process.

Did the Letting Agent’s Contract Make Repeat Fee Charging Arrangements Clear?

But to do this they should have made it very clear and up front in the contract you signed with them that this was what was going to happen. And you would have to have been dumb enough to sign it.

If they didn’t make this clear (or if this was hidden away in the small print or in another document say or you didn’t sign it) then you may well be able to bring a successful claim against the letting agency to reclaim unfairly charged past fees.

They will probably threaten you back with some kind of solicitor’s letter, so be brave and before you go ahead you should be aware of the law on this – which changed following the famous and very long running “Foxtons Judgment” which went all the way to the High Court.

I summarized the judgment in my old blog: http://www.lettingfocus.com/2009/07/foxtons-loses-unfair-letting-renewal.html Read this blog post and other stuff online about the Foxtons judgment before you go ahead and bring a claim.

Don’t Wait too Long to Make a Claim

But I must make an important point here – and that is Don’t Wait! Even if the suspect contract with the letting agent containing the unfair repeat fees clause is still ongoing with the agent – say, because the initial tenants are still in place, you should still act now.

Why? Because, if you wait too long it is possible it could be rejected under the Limitation Act which says you should bring claims within 6 years of the event that gave rise to a claim.

Someone very close to me recently bought a similar claim under the same Unfair Consumer Contract rules against the Scottish Life Assurance Company which is now owned by Royal London.

The background to this case was that he had an endowment policy with Scottish Life, but, because it had once been “assigned” he was refused a merger bonus of £500 when Scottish Life merged with Royal London many years later.

The claimant took Scottish Life to court on the grounds that as a policyholder he should have been made aware that if he ever assigned his policy, (even if he reassigned the policy back to Scottish Life), that he could lose out on any future merger bonus.

The claim was well made because nowhere had Scottish Life made this clear at any time and Scottish Life certainly appeared to fall foul of the Unfair Contract Terms in Consumer Contract rules. The trouble was that the merger happened over 6 years ago.

Time Barred

The claimant tried to argue that his claim could not be time barred because his endowment life policy was still running today. However, the judge decided that the event that gave rise to the claim (in this case, the merger) was over 6 years ago and statute barred – in other words, it was “out of time” and therefore too late to bring the claim.

The claimant is no fan of Scottish Life (not least due to lousy performance on the endowment part of the plan.) He was pretty pleased that Scottish Life had to expend large sums on hiring an external lawyer to attend court because the more junior lawyer was held up in Edinburgh due to snow – but he is still sad the case could not be heard.

However, the implications for landlords who feel they have suffered on unclear letting agents’ contracts are very clear. Don’t wait to bring a claim!

Are You a Pro Landlord?

Finally it is worth saying that “Professional Landlords” may have a harder time persuading a judge that they should be treated as “consumers” for these purposes and thus protected under the Unfair Contract Terms guidance (which is meant to protect consumers against companies.) A judge may tell them that as business people they should really have read the contract and all the small print!

The judge in the Foxtons case left the definition of “professional landlord” open – presumably it means people who were doing property investment and lettings full time when they signed the contract with the letting agent.  But it’s a grey area.

In the Press

My comments on a number of issues, especially to do with – 1) whether landlords should raise rents, 2) the likelihood of rents going up or not and 3) the issues facing local authorities who desperately need to improve their game when it comes to procuring properties from landlords in the private rented sector – have all received a very wide press in the last two weeks. Google buy viagra visa “David Lawrenson” and search using a time line of “last month” to read more.

Final point on Letting Fees

By all means say “no” to repeat letting agency fees if the agent does no work in the renewal of the let. But I must make a final point on letting fees to landlords.

Too many landlords are a little too much on the “cost conscious” side. So, if you use a letting agent to find a tenant for you, including doing the reference checks and arranging and managing the check- in on move in day, you should expect to pay at least 4 weeks rent to the agent (or 6 weeks in London.) It will be more than this for a short term let or a hard-to-let property. (And expect to pay an additional fee on top for a good inventory – about £200 for a 2 bed furnished property in London is about standard.)

But don’t be mean landlord.

Let the letting agent make a living too and if you really cannot abide paying out fees for good work that’s well done, then you should do it yourself.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information and I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

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2 comments

  • Despite the Foxton ruling on renewal fees, letting agents for private landlords include the requirement to pay them even if the same tenant remains. So unless it is not clearly stated in the contract the landlord will have to pay. All letting agents seem to include this clause in their contracts so the private landlord has no choice: either he agrees at the outset or the agent will not take on his business. Go elsewhere? But they ALL do it. What do you suggest? The judgment ruled that the requirement is unfair but only because it was not sufficiently clearly stated by the agent. But it did not rule that in itself the requirement is unfair, so agent can carry on, I understand, ripping its customers off because they have no choice. Am I correct? Would you answer to the email address indicated above? Many thanks K. Miskin (private landlord)

    • Hi Karen
      Yes you are right and I think I did say in the peice that as long as the clause re repeat fees was made clear (and landlords signed and accepted them) then that will usually be just tough on the landlord.
      What do I suggest?
      Well, do what I do and have done in the past…………….:
      Read the letting agent’s contract and go through it with a pen crossing out all the things you don’t like.
      If they don’t accept this, then go elswhere.
      Of course, if you find that no agent in your locale will play ball with you on this, perhaps you are not paying the agent enough for their work – i.e. not paying a fair fee to them.
      In this case, I would suggest you pay a larger up front fee one off fee for finding the tenant and as a quid pro quo the letting agent agrees to strike out the stuff about repeat fees where they have no part to play in the renewal. (I’m assuming here, that the letting agent will have no further part to play in renewing or extending tenancy agreements.)
      Most will play ball with this.
      Or, if the property is close to you why don’t you just advertise and find the tenant yourself using the sites listed on the Resources page at my main site, which will cost you about £70. (Suggest you read the bits of my book about How To Reference a Tenant if you are thinking of doing this.)

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