UK Landlord Forum / Life

The friend I referred to recently is progressing with the first let.

They are asking me (because I warned them about it) how to interpret the Letting Agent's Agreement for letting services because their intention is to go with the Letting Agent for the first year, then hope to take on self-management. So what they are interested in is termination of the Agent's services.

I've read the document and I do not detect any attempt to tie the Landlord into an everlasting contract, nor do I detect any attempt to retain the Tenant as "theirs", nor do I detect very punitive termination fees - what I do detect is a relatively long notice period of 6 months and various line item fees for this and that - including an annual £54 for just managing the same Deposit, same for doing a transfer of Deposit... £288 for signing a new agreement or going to SPT! Plus the annualised and repeating commission it seems:

Upon the tenancy becoming a statutory periodic tenancy or periodic tenancy (this is where the tenant remains in occupation without a new agreement) our fees, calculated as agreed in respect of the original letting, will be due annually in advance within 14 days of invoicing, together with the 'periodic arrangement fee' as set out in 'Additional Charges'.

Anyway, the things I've read about termination include:

Our Full Management or Rent Collection service may be terminated by 6 months written notice by either party. Any Rent and Legal Protection policy will terminate automatically but please see 'FEES and CHARGES' for details of fees payable on termination. Termination does not affect any warranties, assurances or indemnity you have given us. Either party may terminate if the other party fails to remedy promptly any breach of this Agreement.

Then, under FEES and CHARGES apart from displaying the whopping 19.2% of received rent for Full Management it does not have anything specific as a line-item about termination, other than:

If you terminate our Services as provided in section 13 of 'OUR TERMS AND CONDITIONS', or if we terminate in reliance upon your breach, you will be required to pay our minimum fee which would have been applicable to the tenancy less the total fees paid to us to the date of termination.

It also has a minimum charge defined as: These are each subject to a minimum fee of £650 (£780 including VAT) per tenancy term.

Does this read to you like:

a) The Landlord could theoretically start a tenancy with them on 1 Jan 2021.
b) I think it's fair to assume this would be 1 year, running until 31 Dec 2021.
c) The Landlord could serve written notice at any time prior to Jul 2021 and their services would continue to year-end, but he'd not need to pay any more Management Fee into 2022 or an exit / buyout fee?
d) If the Landlord did serve notice, say, in Nov 2021 then it would absolutely go into the next term and other fees would be due - unclear to me whether it's this £780 or the 19.2% of expected rent for the next year.
e) If the Agent's services are terminated, then the Tenant can stay with the property and the Landlord - the tenancy does not have to end.

I'd take out the "either party may terminate if the other party fails to remedy promptly any breach of this Agreement"

That's how I got rid of my swamp feeding gutter rat of an agent, with serval breaches one of which included operating unlawfully without a CMP in place.

Letting agents always cock up, that allows them to basically take the piss. Landlords who use letting agents only find themselves in trouble because of the letting agent.

As for fees extortion spring to mind, £54 for management of a deposit, is it insured or custodial ?? Then £54 quid to transfer it , £288 quid for just going on a periodic for basically doing nothing.

I'd be walking away at this point

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
including an annual £54 for just managing the same Deposit

That's unreasonably high in my view, even as a one-off when deposit is first paid. It's from more than double to more than five times an insurance scheme charges a landlord, never mind the free custodial schemes.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
same for doing a transfer of Deposit

Ditto.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
... £288 for signing a new agreement or going to SPT! Plus the annualised and repeating commission it seems:

New agreement, okay.

SPT, absolutely not. There is no work involved for the agent there.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
Upon the tenancy becoming a statutory periodic tenancy or periodic tenancy (this is where the tenant remains in occupation without a new agreement) our fees, calculated as agreed in respect of the original letting, will be due annually in advance within 14 days of invoicing, together with the 'periodic arrangement fee' as set out in 'Additional Charges'.

A statutory periodic tenancy is a periodic tenancy.........

It's not possible for a tenancy to become a (non-statutory) periodic tenancy. It's either is from the start, or it's not.

I would not agree to pay a year's worth of fees up front for a fixed term tenancy, never mind for a periodic tenancy which may end in a month to two time by the tenant.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
Either party may terminate if the other party fails to remedy promptly any breach of this Agreement.

What timeframe of notice? If it's the same six months notice, then this clause is useless as it does not provide anything extra the previous clause already provides.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
If you terminate our Services as provided in section 13 of 'OUR TERMS AND CONDITIONS', or if we terminate in reliance upon your breach

What about termination in reliance upon their breach?

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
Does this read to you like:

c) The Landlord could serve written notice at any time prior to Jul 2021 and their services would continue to year-end, but he'd not need to pay any more Management Fee into 2022 or an exit / buyout fee?

The termination clause say six months notice, not at least six months notice. I would strictly interpret that to mean termination occurs exactly six months after notice is served.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
d) If the Landlord did serve notice, say, in Nov 2021 then it would absolutely go into the next term and other fees would be due - unclear to me whether it's this £780 or the 19.2% of expected rent for the next year.

The higher of £780, and £288 (does that include VAT) + 19.2% of a year's rent.

Quote from: Hippogriff on November 26, 2020, 12:41:17 PM
e) If the Agent's services are terminated, then the Tenant can stay with the property and the Landlord - the tenancy does not have to end.

Yes. This is a contract to which the prospective tenant is not a party. The tenant's tenancy agreement with the landlord does not depend on landlord's contract with their agent. And then there's the whole security of tenure protection offered to a tenant by law restricting how a landlord can terminate a tenancy.

A more appropriate question would be whether the landlord is required by contract with agent to bring the tenancy to an end, or to continue paying fee while the tenant which the agent bought in continue to reside at the property under a tenancy. I would say no based on what you posted.

It's that last question I was trying to ask. Is there anything in red that implies the Agent believes they 'own' the found Tenant and would press to ensure fees (or a penalty) were due as long as they were in residence, even if the Agent's services weren't being used... and I concur it doesn't attempt to do that, but it is worth a lot for someone else to also say that.

I have had contracts where a penalty like 3 months rent was due,if dispensing with services with a tenant in situ. I waited until they left,then dropped the agents. I would certainly assume from this case that they would have a legal case to demand the payment while the tenant remained. Surely your friend can find someone with less eye-watering fees for management? I never paid more than 12%,and this went down to 10% when I added another property. There are plenty of agents round here asking 10% now for any number of properties. I would run a mile from this agreement,knowing what I know now.   

Quote from: heavykarma on November 27, 2020, 10:29:25 AMI would certainly assume from this case that they would have a legal case to demand the payment while the tenant remained.

Are you saying you think there is an attempt with what you can see with the red text to 'hold onto' the Tenant as theirs and charge fees even if they aren't providing services? I can't pick that out. I think if notice is served correctly and at the right time then my friend is off scot-free...

Regarding the fees (of which there are many line-items)... and %age... I agree. I do not know if any negotiation has taken place, but we're talking about a complete newbie Landlord here, so maybe not.

I have charged up my poor brain with coffee,and  gone over it again.I think you may be right.Is this all about "worst case scenario",or does you friend just want to ease themselves into self-managing by learning the ropes,then dispense with the services? There must be simpler and cheaper ways of doing that.Having you as mate to call on gives them a head start! Your comments and those of others over the years have given me a lot of confidence.

P.S.It is hard for me to be unbiased,I have a deep-seated suspicion about all letting agents.It can be easier to break away from the Moonies than get out of the clutches of some of these shysters.

They're a friend of a friend... I don't want to offer to get too involved. I am already a little more involved than I would like (and now so are you lot). I would actually offer to take it on for them, maybe for a curry every now and again, if they were a) close (geographically) and b) close (emotionally). Their objective is to ease themselves in... it's a family home with quite good local amenities etc. so the [correct] Tenants (fair expectation) should stay for a while and once they're in a steady-state the Agent won't really be required... at these levels of fees, though, I'd be questioning whether they're ever going to earn their money.

I have been re-reading the Agent's terms of business document again, and I am wondering if this part I've emboldened is an attempt to hold into the Tenant as theirs (and incurring fees) even if termination of their services has been carried out correctly:

Introduction of new tenant and change of sharers
If a tenant we have introduced, or an approved sharer with that tenant, introduces another tenant to the property or to another property, you will incur a fee on the same basis as set out in this Agreement for Tenant Introduction. A tenancy where at least one of the original tenants or approved sharers of the property remains in occupation will be treated as a continuation or renewal of the original tenancy for the purposes of this Agreement.

This is now starting to read like... if any future tenancy commences (whether it be a new fixed term AST or the original AST moving to SPT) where the Tenant(s) the Agent found for the first year remains there - he will be OK self-managing as he terminated the Agent's services... but the Agent will consider a continuation or renewal... therefore their fees will be due regardless? It's hidden under a section that purports to be talking about Tenant changes but actually it's about Tenancy persistence.

Any thoughts?