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LettingFocus

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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.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Letting Agency Fees Can Be Traps for Accidental Landlords says Letting Focus

Just the other day, I popped in to a local letting agent and was pretty surprised.
It was all very impressive with a posh waiting space and lots of young twenty somethings all busily taking calls at rows of high technology work stations. Wow! You don’t see that kind of thing in our local high street too much.
I was there to see if they could help me.
You see, right now I’m pretty busy preparing for my talks at the London Property Investor Show – the only property show that is worth bothering with. (You should go -see our ticket offer below)
So I thought, maybe this agent could take the time off my hands and find a tenant for a property that I have which have just become available.
As you may know, I usually do all this stuff myself for my London properties.
I find that finding and checking tenants’ references is easy for me because I know what I am doing and have done it a lot.
And in London, we have the blessed Gumtree.com free site to use to find tenants which works very well – as long as you remember to take a few pics of the property and keep refreshing your ad each day.
So, I asked the agent what their fee was.
“10% plus VAT” they replied.
OK, so far so good, but this is a bit like saying that a piece of string is, “Oh, so long.” In other words it is not much use at all.
“And what term is that 10% based on?” I asked.
“All our tenancies are for 24 months” was the reply.
Gulp. …..Now let’s see.
For this one bedroom flat, which was to rent at £758 per month, that is a cool fee to them up front of £2137.56. Crikey!
Now, let’s be honest, how many tenants do you get who come along and would willingly sign up to a 24 month term?
Not many. In fact, in all my 22 years of letting, I have never had one who wanted such a long tenancy.
For a start, they don’t know what you will be like as a landlord and 24 months is a long time to be stuck with a lousy landlord. But more importantly most tenants like the flexibility that renting gives them and would quite naturally like to be able to get out of a letting after 6 months. As a landlord too, you would be nuts to willingly sign up for a 24 month term because if you get a tenant who is, frankly a bit of an a**e you will want to be able to get rid of him a bit earlier than 24 months.
And unless, he was at least 2 months overdue on the rent or decides to run a brothel at the property or do something else of a nasty criminal nature, there is no sure fire way you can be easily rid of him if you have signed up to such a long term.

OPT FOR 6 MONTH TENANCY AGREEMENTS
That is why most sensible landlords opt for 6 month fixed term contracts which are extendable if everyone is happy after 6 months has ended – i.e. you simply agree to roll the same tenancy agreement on (it is called a monthly periodic tenancy)
After I walked away, I called this agency, this time posing as a tenant.
They explained about the 24 month thing - but only when pressed.
I queried why it was so long.
And the answer came back: “Sorry, all the landlords insist on it” which is, of course, is utter nonsense.
However, many new Accidental Landlords who have decided to rent out their home because they can’t sell it - will fall for all this – which is why letting agents like this one are trying to get away with it.
Oh, what happened in the end?
The next day, I let the property for nil cost using an advert in Gumtree. A nice lady tenant moves in next week.
And before I get complaints form letting agents reading this, I should say that not all letting agents operate like this.
Many agents in London and all the ones I have used for my Kent properties are sweeties and charge a fair rate for very good work.
However, there are rogues about – and some of the rogues are big names. So watch out.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of property investment expert lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 3 years has been the UK’s top selling property title - buy the UK's top selling landlord book.
It 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 buying property below market value.
I’m an expert property journalist, property speaker and a well known landlord blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords coaching
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentoring programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property investors coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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Letting Agency Renewal Fees - The Lettingfocus.com view

I recently did some consulting with a chap who was not happy that his letting agent was going to charge him to renew his tenant’s contract – the original tenancy had been arranged through the agency.
My view is that all landlords must read the contract with the letting agent BEFORE they sign it. If they have signed to say they agree to being charged a renewal fee then that’s tough, I’m afraid.
I’m not an agent but on the matter of agency fees, my view is that agency letting fees are not high as long as you avoid renewal fees.
Simply extend the tenancy - doing this should not involve you or yuor agent in any work, except simply asking the tenant if that's OK with them.
In fact, a friend of mine has just asked me if I would find a tenant for him whilst he is overseas. My answer was No.

What A Letting Agent Does to Find a Tenant
Putting in adverts, doing viewings on wet evenings and weekends, checking references, doing check ins and dealing with the general public and the like is all a lot of work – and not something I would personally do for the going rate agency finding fee of around 8 to 10% plus VAT.
Sorry, but I have better things to do than that – which is why I like to keep my tenants by keeping my rent increases reasonable and my rents below the market average.
The reality is that there is not much cash in lettings – agents often use it as a loss leader to get more lucrative work selling properties.
This is why they often try to make some extra money by charging renewal fees – even though they often don’t do much at time of renewal – and why they always try to load up fees for other services like printing off copies of tenancy agreements and making charges to tenants for doing references etc.

New Tenancy Agreement
In this particular case the agent wanted to issue a new tenancy agreement.
I said that, seeing as the landlord indicated he did not want to necessarily issue a new longer term tenancy, why not just extend the existing one to make it a periodic tenancy.
One benefit to doing this would be that the landlord would not need to join a Tenancy Deposit Scheme because the original tenancy started before April 2007 – i.e. before TDS became compulsory. So, he would save on the hassle and / or cost of having to register for TDS because TDS is not compulsory for Tenancy Agreements starting before 6 April 07.
If you need more advice on where to letting agency fees ask me. I’m David Lawrenson from property investment experts http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on UK property investment and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog and run a property investment advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my landlord blog and details of my networking, advice, property seminar programme at my website http://www.lettingfocus.com/
Click here for details of my next London landlords networking meeting.
What’s unique about lettingfocus.com is that we offer independent property investment mentoring 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.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

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