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Foxtons case & Letting Renewal Fees (Continued) by Letting Focus

Many people commented on last weeks’ post about Foxtons and repeat letting fees and asked for further advice about what to do now. But before I do that, let’s first be clear about what the case was all about.

Repeat Letting Fees – a Recap
The case was brought by the OFT against Foxtons and is about unfair terms in consumer contracts.
The High Court decided that certain terms in the Foxtons letting contracts with landlords were unfair in that renewal fees charged to landlords (when tenants stayed on) should have been highlighted more prominently, not only in the contract but in other sales literature too.
The OFT argued that these fees were found to be hidden and not properly bought to the landlords’ attention.
The court agreed that in the case of Foxtons, they were indeed buried and therefore were a “trap” for consumers. It was this “hiding of the renewal fee” whch was unfair.

Renewal Fees Will Continue
But landlords must understand that renewal or repeat letting fees have NOT BEEN RULED to be unfair in themselves.
What was wrong was the way they were hidden or rather, not highlighted properly.
Unfortunately, charging percentage based renewal fees where a property has been let to a tenant for a landlord on a “Let Only” basis will probably continue.
Both we at Letting Focus and the National Landlords Association (NLA) still say that repeat renewal commissions are “money for nothing” and should be stopped.
For my let properties, I have only ever paid an agent a one off fee for finding a tenant. I simply won’t entertain an agent who wants renewal fees.
When a tenancy comes to the end of its initial period - and if I like the tenant, I simply ask the tenant if he would like to stay on.
There is no actual work involved for the agent or for me apart from asking the tenants to send an email confirming they would like to stay on. That does not justify a fee of more than £20 – not in my view anyway.

New Sneaky Practices Likely to Emerge
Tessa Shepperson writing in LandlordLaw says she understands from her correspondents that some rogue agents are now trying to get tenants to close existing tenancy agreements at the end of a fixed term and telling them and their landlords that the tenant must sign a a new agreement.
That way the agent gets to charge a fee again! So watch out for this as this is nonsense.
A much better option would be to extend the tenancy in the way I have outlined above. That way, the tenancy continues from month to month on a “periodic basis” until the parties want to end it, at which point they have to give due notice.

What Should Landlords Do About Past Fees?
The ruling says that if both parties - the OFT and Foxtons - cannot agree on the consequences of the ruling, then another hearing will be needed for them to be determined.
It is also still possible for the ruling to be appealed. Let’s hope not (As I write this there is no sign of an appeal yet.)
If you have paid repeat renewal fees in the past, whether you can claim back may depend on whether you are a big or small landlord.
This is because the ruling made a rather weird distinction between “consumer landlords” (smaller landlords with a small number of properties for whom being a landlord is not their main source of income) and “business landlords” (larger or professional landlords with a greater number of properties some of whom operate as a limited company).
It is possible that “business landlords” won’t be considered as “consumers” and may not succeed in claiming back renewal fees.
Also, each claim would have to be judged in court on a case-by-case basis. And whether you win or not would depend on the nature of the contract and whether you were aware of the full implications of what you were signing.
According to the NLA, “The terms of relief following the judgment have not yet been resolved and it may be prudent to await this.”

If You Want to Claim Now….
The NLA advise that if you want to start claiming you could send a Letter of Claim to your letting agent.
This letter should give the letting agent 14 days to return the fees and it should be the first step on the claims process. If you don’t do this a judge may not be especially sympathetic in court, especially when it comes to apportioning costs of any court action. Ouch!
Of course, if the letting agent does not return the fees (which can go back for a maximum of six years), you could issue proceedings against them at your local court or on line at http://www.moneyclaim.gov.uk/
If there is an appeal by Foxtons the court could suspend any claim of course.
In summary, we would suggest you get legal advice on this and keep reading this blog and the rest of the press to see which way things are moving.

This blog post has attracted a lot of attention and questions, so thanks for that.
Judging by them, perhaps I just need to spell it out more clearly:
If a letting agent made it clear in a contract with a landlord (and did not hide it away in some hidden sub clause on another document somewhere) that, you the landlord would be charged repeat fees forever, and you signed up to that, then you are kind of stuck.
If you don't like a clause request it be struck out. If the agent won't budge, go and find another lettting agent.
Click on the appropriate categories at the end of this post, if you want toread more on repeat or renewal fees that letting agents charge.

I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on letting property 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.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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  1. Anonymous Anonymous | 11:26 AM |  

    David, like yourself I've extended the initial period with my tenants by just asking them to confirm by e-mail thus bypassing the renewal fee from my estate agent (they charge one month's rent for renewal!). However, I am unsure where that leaves me in regards to the terms of the original contract that was signed for the tenancy. For instance, if I want to evict using section 21, etc, is it affected by having a month-by-month rolling contract?



  2. Blogger lettingfocus | 11:38 AM |  

    Thanks for the post.
    It makes no difference at all.
    All terms of contract remain the same and you can use Section 21 Notice too now that initial fixed term has ended.

  3. Anonymous Anonymous | 12:24 AM |  

    Thanks David for your useful article. I signed a 12 month Letting Only contract and did all the rent collection and management myself. When 12 months were up, the tenants and I just verbally agreed to let the contract rolling into a periodical basis. Then the agent wrote to me demanding a month rent as renewal fee, although no renewal was done. The tenant and I replied in a joint letter asking the original deposit back, but the agent refused. Now they wrote to me threatening Court proceedings if I do not pay them within 14 days. How can they charge so much for doing nothing. This just seems so unfair. But their letters sounded so intimidating, I have been worried sick. Use of a lawyer could potentially cost more if I lose. Without holding you for any liabilities on your advice, do you think I should just render to their pressure and pay them?

    Would appreciate anyone to offer info on the probability of winning. This is my first and only letting experience. I do not really want to go to the court (I have never been to).


  4. Blogger lettingfocus | 4:13 PM |  

    Really as the blog post said, chances of success would depend on to what extent the fees were clear and upfront or hidden away in the samall print in the contract you signed.

  5. Anonymous Anonymous | 9:17 AM |  

    Dear David,
    I am so glad I found you! This is great.

    I am an overseas landlord. My tenants are renewing and I am with Foxtons (!). They sent me reminder and have also told me that their renewal fees are now 7%+VAT. Can I not pay this or challenge it? I was going to propose to them that I continue paying management fee but not the renewal fee. Where do I stand?

    Many thanks and regards,

  6. Blogger lettingfocus | 4:25 PM |  

    As a non lawyer it is impossible for me to go further than the general advice in the blog post piece which itself quoted advice from the National Landlords Association.
    The NLA themselves suggest people should, if in doubt, consult a solicitor who is an expert in property law. There is one on my Landlords Resources page. Suggest you try them.
    Sorry I cannot be of further help.

  7. Anonymous Anonymous | 4:18 PM |  

    Dear David

    I too am fighting with my agency over renewal fees. Unfortunately in the terms, they have stated they will charge "11% comm for renewals, and /or extension or continuation". Does this mean I am trapped even if I let it roll by extending monthly? Thanks for any comments!

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