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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Letting Agent Fees – What’s a Fair Fee to Find a Tenant by Letting Focus

Since my last two blog posts, many people have asked me what is a fair fee to pay a letting agent for finding a tenant.
My answer is
1) It depends where in the country you are (London agents always charge higher fees as a % of the rent)
2) How good a negotiator you are.
3) How easy the agent thinks it will be to let your property
Read the Contract
Do you like reading contracts?
No?
Well, sorry, but it’s time to get “down and dirty” with a letting agent’s contract.
Write this in bold letters, WHEN I USE A LETTING AGENCY I WILL READ THEIR CONTRACT VERY CAREFULLY.
Why?
Well, you have to in read it order to understand the limits of what they will do and won’t do for you.
Most will not evict a tenant who does not pay the rent, for example - at least not in their standard fee.
So why do contracts matter so much?
Well, if I had a fiver for every time a newbie landlord said to me “Wait a minute, the agent has just sent me another bill for a thousand pounds for a tenant who moved in 6 months ago” I would have about £500. The reason is, “renewal fees or repeat letting fees.”
As we have seen from the recent OFT case involving Foxtons, letting agents - especially those in London – just love renewal fees because if the tenant agrees to stay on after the end of 6 months; the agent gets to bag another fee for doing not very much.
If you have signed a contract agreeing to this, you are a bit stuck unless the existence of the renewal fee was hidden in the small print.
And if that was the case, then see my last post for more on what to do.

What’s Included and What isn’t Within the Letting Fee
Also, check out what’s included in the letting agent’s fees – for example, some agencies offer a free inventory as part of their service whilst most others charge extra for this.
If inventory is included, then great, but always request a copy of an old inventory to check quality and detail which varies greatly.
Also, ask if they make extra charges for checking references, doing check-ins on move-in day, signing tenancy agreements or notifying utility providers and the council tax people.
Ask if the agent uses an up to date credit referencing system to check out tenant’s ability to pay the rent and does it check for County Court Judgments too. What does it say about the referencing system they use on the internet?
Assess if the agent understands the importance of having proper references and an inventory done.
The former will reduce the chances of ending up with a tenant from hell – one who won’t pay rent and who could take months to evict - and the latter will ensure that if the property is returned in a mess or with things damaged beyond normal wear and tear, you’ll be entitled to keep some or all the deposit to pay for it.
If the agent does not understand this, go elsewhere, because this is basic stuff.

Letting Fees - What I Pay
For Tenant Find Only services - where the agent find and “reference checks” a tenant, sends the reference report to me for my OK, collects a holding deposit, does the move in, collects the balance of the tenancy deposit and first months rent and signs the tenancy agreements - I have never paid more than 4 weeks rent, even in London.
And no, I won’t pay the agent any other extension or renewal fees (as all my tenants will move onto a periodic tenancy at the end of the initial term.)
I have a phone and I know good plumbers, heating engineers and plumbers so I can easily manage all my properties myself too - so no need to pay a letting agent a management fee. I just pay them to find a tenant and that’s it.
Some landlords who used letting agents before may wonder about doing it themselves. We can help you with this. Just ask about my one to one property advice service and my property seminars or join my newsletter by emailing me at [email protected]
Plus at our Property Affiliate page we have set up links to lots of good long established merchants who can find tenants for you by putting your property online, checking tenant references, arranging the best buy to let mortgage, finding good landlords insurance and a lot of other landlord services too. Click on our Landlords Resources page for more information and great deals from our merchant partners.
We are having a couple of well earned weeks off. We will post again on 12th August!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
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 book - buy Property Investment Book.
What’s unique about LettingFocus is that I offer independent unbiased advice on buying property as an investment because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas) and what type of property to buy and I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
AFFILIATE PRODUCTS
Find out about all the GREAT DEALS we have arranged at our Property Affiliate page. More will be added over the next month.
Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week.
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Foxtons Loses Unfair Letting Renewal Fees Case says Letting Focus

It is a bad day for Foxtons and other letting agents who have been for years charging excessive amounts for carrying out renewals to tenancy agreements when there was often no work involved at all.
The OFT went to the High Court to fight what it said were unfair terms in Foxtons contracts.
This case has dragged on for years and in today’s ruling, the Judge accepted that all the terms that the OFT brought before the court were unfair.
These include Foxtons terms that required a landlord to pay substantial sums in commission where a tenant continues to occupy the property after the initial fixed period of the tenancy has expired - even if Foxtons played no part in persuading the tenant to stay, and does not collect the rent or even manage the property.
Also ruled unfair were terms requiring a landlord to pay commission to Foxtons even after it had sold the property and allowing them to receive a full estate agents’ commission for sale of the property to a tenant.
The ruling said that charging repeat renewal commission by Foxtons represented a “trap” and that such important terms must be flagged prominently not just in the contract, but also in any sales literature and processes.
I know from my own experience that many non professional landlords do not read the standard terms with any degree of attention and don’t expect important obligations to be tucked away in the small print.
But they often are and were very rarely bought to their attention.
The case makes clear that contracts should be written in clear and straightforward language with important provisions, particularly those which may disadvantage landlords, as in this case, given prominence and actively brought to people’s attention.
The OFT has said that it expects the letting industry to comply with this ruling and will take the necessary steps to ensure this where appropriate.
If you feel you have been “done” over the years by a letting agency using such tactics you should start by writing them a formal letter asking for your money back.

SOME LETTING AGENTS WILL GO OUT OF BUSINESS
I applaud the decision which must leave a lot of letting agents quaking tonight as they can surely expect the claims for repayment to roll in.
But you’ll have to make your claim first – these letting agents ain’t going to rush to send you a cheque - and I’m guessing many letting agents won’t pay up too easily either. (I’m no lawyer but I imagine it will certainly help if you have copies of the documents you had when you signed up to the contract)
Other letting agents will be pushed over the edge by this and go out of business taking some landlords deposits with them (but that's another matter dealt with in other posts on this blog) .

SNEAKY FEES
Hiding letting renewal fees in the way some letting agents did was a typically sneaky property industry thing to do that is sadly standard stuff for the whole financial services sector.
But why did letting agencies do it?
Well, they did it for so long because they could and because many novice landlords were eother too lazy or too busy to read all the small print in the contracts.
Maybe they were tempted because many landlords were too mean to pay a decent up front fee for an agent’s service.
I have some sympathy with them on this one because I have on occasion looked after properties for people overseas and I was frequently astounded by some amateur landlords’ meanness.
I frequently found meanness about getting things fixed for their tenants and about spending any money at all on their properties.
I can well imagine that these were the type of people who would argue over paying a decent rate for an agent to find them a tenant.
No wonder some letting agents went all sneaky and opted to charge these hidden repeat renewal fees that have now been outlawed.
For some it was the only way they could make a living (though in Foxtons and other big London letting agencies it was probably just down to a rapacious desire to squeeze every buck possible out of amateur landlords who were too huried to read the small print.)

EXPECT LETTING AGENCY FEES TO GO UP
How will this effect things going forward?
Well as a result of this decision, I fully expect up-front agency fees for finding tenant to go up and also for more landlords to opt let direct using the various portals.

NOT ALL LETTING AGENTS CHARGED SNEAKY RENEWAL FEES
finally it must be said that charging renewal fees and other sneaky fees was not practiced by all letting agents, of course. Outside London and the South East the practice was quite rare - with most agents only charging a flat rate one-off fee to find a tenant.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
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.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too. And find out about OTHER great deals we have arranged at our Property Affiliate page.
More will be added over the next month, once we have checked them out.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Foxtons letting agent renewal fee case - Latest from Lawrenson of LettingFocus

Do you remember the seemingly never ending case of unfair letting agency repeat renewal fees imposed on landlords by letting agents?
Well, landlord law guru Tessa Shepperon recently sent me an update on the ongoing case.
The background to the case that the Office of Fair Trading (OFT) has against Foxtons Ltd (the letting agents) is about their refusal to agree that certain terms in their letting agency contracts with landlords are unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
One of these terms relates to repeat fees imposed on landlords where the initial fixed term in the original tenancy has come to an end.
Many a landlord (who never bothered to read the contract they signed with their letting agent properly) has suddenly woken up to the fact that their letting agent is trying to hit them for a further set of fees long after the initial job of finding the tenant has been completed.
One side issue in the case was whether any injunction brought against Foxtons could affect current letting agency contracts as well as future ones.
Initially, the first Judge had accepted Foxtons’ argument that any injunction about unfair terms could only apply to future contracts. Bad news for landlords!
But, we now had some good news because the Court of Appeal (bless their cotton socks) has now overturned this initial ruling, thus confirming the OFT's view that it can take enforcement action under the legislation to protect consumers in relation to existing contracts too.
Indeed, the Court of Appeal stated that the unfair terms legislation’s aim was to protect ALL consumers, never mind when the contract was signed.
LETTING AGENCY RENEWAL FEES AND LANDLORDS
What this means is that if you are a landlord with a letting agency contract with Foxtons, they should not now levy any charges under the disputed clauses on you until after the main action has been heard.
And, as you asked, the main action - i.e. on whether the terms in question are actually unfair or not under the regs – should be heard by the High Court in the week commencing 27 April.
You should be following this case if any letting agency has tried to impose renewal charges on you for finding a tenant long after the tenant’s initial term has ended.
Hundreds of thousands of landlords could be affected and letting agencies could face huge claims and loss of fuure cash flows if the landlords win this one.
We will keep you posted.
Update 10/7/9 - Foxtons has lost the case. Please go to: http://www.lettingfocus.com/2009/07/foxtons-loses-unfair-letting-renewal.html to read more.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Property Letting 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 Landlords 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, HMOs, licensing, capital gains taxes and it has new sections on Letting Agents and Company Lets
I’m an expert property writer and property speaker - and I run the well known landlords 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 and consulting to anyone looking to buy property for themselves or to let out. I can 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 investment advisors 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 these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
Find out about some great deals we have arranged at our Landlords Links page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
Over on the right hand side under all the previous blog entries and the bit where it says “Links” and “Subscribe” you will see a button saying “Site Feed.”
You simply copy the site feed link into your News Reader or News Aggregator. Even a non techie like me managed to do this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
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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.

LITIGATION
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

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
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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