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Are Letting Agency Renewal Fees Fair asks David Lawrenson of Letting Focus. We look at the Foxtons case.

A reader of this blog recently contacted me with a query which I’m seeing all too often right now. She had rented out a flat for the last four years to a tenant who was found by a big London Letting Agency. The landlord managed the tenancy herself.
The landlady paid the agent 10% for the first year of the tenancy and unfortunately had signed a contract to pay 8% for each year of renewal thereafter. (As you will know from other blogs posts my advice is to pay a generous up front fee and strike out any clauses requiring you to pay renewal fees where the tenancy is simply extended to become a “monthly periodic” tenancy because in these cases the agent does no real work to extend the tenancy!)
In this particular case, the tenant is now buying the flat – a result of a private agreement between the landlady and the tenant.
However, when the landlady informed the agent of this, they pointed out a clause in the tenancy contract which says, “In the event that a tenant or a third party connected with the tenant introduced by us, subsequently purchases the property, we will be entitled to a fee of 1.5% of the purchase price plus VAT.”
The landlady wanted to know if there was any way she could get out of paying this fee, or at least some of it.
She was shocked that it’s so much when they have done nothing apart from securing the tenant four years ago.

The answer lies in litigation which is ongoing at present.
In the case of Foxtons Ltd v Pelkey Bicknell this year, the Court of Appeal said that it is not sufficient for an agent to introduce a purchaser to earn a sales commission. The agent has to be the effective cause of the sale.
The Office of Fair Trading (OFT) is also challenging, in the High Court, the agency, Foxtons' standard terms and conditions for letting properties.
The OFT believes that the Unfair Terms in Consumer Contract Regulations 1999 mean that some charges made by the agent are actually unlawful.
The case mainly involves the right for the agent to claim a renewal fee from the landlord if a tenant renews at end of the original letting period. But the challenge also covers commissions payable where a tenant buys the property.
This case seems to have been pending for ages and the outcome of the trial and any appeals may not be known for some time yet.
Some solicitors in the north west of England have issued county court claims for landlords for repayment of fees paid to agents in similar cases.
It may also be possible to issue proceedings in court for repayment of cash previously paid unlawfully on these grounds and claim interest from the agent too.
However, it may be better to wait until the result of the OFT case is known and don’t forget that you have up to six years to issue any claim in court.
According to my friend and legal expert Tessa Shepperson at the website LandlordLaw, another option could be to draw the letting agency’s attention to the Foxtons case and offer to pay any monies in dispute into a separate interest paying account to show good faith. Then, if Foxtons wins the test case then the money would then be paid out to them. If they lose, you get to keep it.
Please note we are not lawyers and this is a rough guide of the situation only and should not be relied on as definitive advice. We advise you to always take legal advice from a solicitor experienced in these matters.
Click here to read another short article by me about letting agency fees

I’m David Lawrenson of LettingFocus.com - the landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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