UK Landlord Forum / Life

My tenant has requested an early termination one year into a 3 year fixed term contract. All agreed as long as they pay the rent until a new tenant is found and also any fees as detailed in contract (they are required to pay letting agent fees for the remainder of the fixed term).

We would be looking at a £200 a month increase on rent for a new tenant, in line with current market valuation, however the letting agent has said that due to legislation we are unable to profit from a new tenant for the next two years (what would have been the remainder of the existing fixed term), and that the additional £200 a month would go towards paying off the fees the current tenants owe the agent.

Is this correct?? I can't find this legislation anywhere. I can understand protection for tenants if a landlord ends a fixed term and then gets someone in at a higher rent, but the tenant has requested the early termination and the fees are theirs to pay.  Feels a bit off to me.

Any advice? Anyone got a copy of this legislation?

Fees the tenant owes the agent? What are you on about?
You pay the agent a fee. What they've said makes no sense. Weird to go for a 3 year tenancy, is this commercial?

Quote from: landlordbeck on January 24, 2023, 07:16:32 PM
Anyone got a copy of this legislation?

Have you asked the agent for a copy of, or an link to, the legislation that they are referring to?

Ask in an email (never ask them things on the phone).

The usual way of doing this is that the tenant agrees to pay rent until a new lease is signed,plus the agent's fees for finding and setting up the new tenancy. I have never heard of any of the other legislation they are quoting,I think they are trying it on,I would be seeing this as an opportunity to change agents (or take over yourself if possible)

The legislation is the Tenant Fees Act and the agent is not quite correct (but broadly so.)

What you can charge a tenant for early terminating an agreement is limited to the actual "loss suffered by the landlord as a result of the termination of the tenancy".
"Lost" rent is not a loss in other situations (because when the tenancy ends, no rent is due) and I'd expect that to be the case here - there are no precedents that I know of.

You certainly can't claim an additional £200 for an notional increased rent. As a general principle you can't claim future losses at all, but the legislation is pretty clear anyway.

The agent is also limited to their actual costs, and so, if the agent is owed money, that sounds like a loss. But if they're claiming their commission for the tenancy, again, that's a prohibited payment.

Landlords can't charge much (if anything) for ending a fixed term early (even re-advertising is probably not a loss, but simply a bringing forward of a cost that would have happened anyway).

The net result of this is, essentially, that there is no incentive for a landlord to agree to the early termination of a tenancy (which I am sure isn't the intention, but that's parliament for you).
The most likely practical outcome is that no one should ever offer a three year tenancy agreement (which is going to disappoint a lot of letting agents).

Quote from: heavykarma on January 25, 2023, 08:46:14 AM
The usual way of doing this is that the tenant agrees to pay rent until a new lease is signed,plus the agent's fees for finding and setting up the new tenancy.

That would no longer be legal.
What you'd have to do is agree to market the property while the original tenancy continues (with rent due etc) and when a new tenant is found, agree to the existing tenant surrendering.

Why a landlord would agree to that, I'm not sure, because it sounds quite stressful for no additional income, but there you go.

Thanks for the replies.
Yes a three year tenancy - residential. Two or three year tenancies seem to be quite common in our area.
The fixed term contract has a clause that on early termination by either party, the agents monthly management fees (11% +vat) must be paid for the remainder of the fixed term. I am surprised this doesn't come under the prohibited payment. From the legislation it looks as though these fees could only be charged up to the point a new tenant takes over, after which point there would be losses to landlord or the agent, particularly if we continue to use the same agent.
I will email and ask them for a copy of the legislation.
I would be surprised if the tenant actually agrees to pay these fees! I would only expect them to cover any loss of rent/cost of remarketing until a new tenant can be found.

The agents fees would be a prohibited payment unless they're actually incurring those costs (again, lost income doesn't count).
They could charge the landlord though.

The reason that two and three year tenancies might be "common" is possibly explained by those fees and those terms.
It's a terrible idea for a landlord or a tenant - two complete strangers shouldn't enter a three year agreement full stop. Has any three year period in life ever gone as expected?

Quote from: landlordbeck on January 25, 2023, 09:19:03 AM
Two or three year tenancies seem to be quite common in our area.

They're not, wherever you've got that information from is not correct. If I were an estate agent with over hanging frees for 3 years I'd be telling people 'its normal' aswell.

Quote from: jpkeates on January 25, 2023, 09:40:09 AMIt's a terrible idea for a landlord or a tenant - two complete strangers shouldn't enter a three year agreement full stop.

Wise words. So many anecdotes come to mind... but I'll refrain.

What I will say is the pretty sane standard Landlord approach many of us here recommend, and enact, is the shortest minimum term AST followed by the flexibility of periodic, is probably still the best approach.

Unless, of course, rent is being paid up-front in full... like foreign students often need to do as they can't be checked or referenced... then 12 months of rent going into your bank account can turn anyone's head.

Think to yourself - whose purposes are served by having such a long agreement established? Sure, there's the notion of security... some Tenants like that, some Landlords do... but Agents love it, especially if they can word their agreement such that all of their commission is paid at tenancy commencement. If a Landlord signs up to that, know that the Agents are down Spearmint Rhino's later that night, thanking whatever nefarious imp they believe in - via various prayers and devotions and sacrifices, that you walked through their door earlier.

I don't think this adds to the question, it is more a rant aimed at Agents.