Are letting agents playing fair with their fees?

Are letting agents playing fair with their fees?

15:03 PM, 26th October 2022, About 2 years ago 25

Text Size

Hello. Our lettings agents found us tenants who stayed a year and then asked to renew for another year. Their contract was renewed for a further year and our agent charged us 8% of ‘incoming rent ‘ for the following year, billing us for the first 6 months of the one year tenancy.

After only a month our tenants had to leave the country for family reasons so gave notice and stayed a further two months.

Two things of concern: a) there was ‘incoming rent ‘ for only three of those six months for which we had paid the agent a percentage upfront, and b) the agents’ terms and conditions state that the percentage of rent they charge for the second year of a tenancy is 7, not 8.

The agents claim that the charge was payable whether or not there was incoming rent (although their invoice states “8% of incoming rent”) and was a fee for renewing the lease.

Are the agents entitled to a percentage of rent never received?

Is it reasonable to expect them to refund the difference between the 8% they charged us and the 7% we should have been charged?

These issues have only come to light now as we prepared our paperwork for submission to our accountant.

Any advice or suggestions much appreciated.

Nancy


Share This Article


Comments

Jay Patel

16:54 PM, 27th October 2022, About 2 years ago

Hi Dennis ... I thought that if you allowed the tenants to carry on with the periodic tenancy, then the rent would remain exactly the same as the original £1375 per calendar month ... unless of course you’ve got a built-in increase to say that the rent will be going up to a particular predetermined level.

David Smith

17:10 PM, 27th October 2022, About 2 years ago

Reply to the comment left by Jay Patel at 27/10/2022 - 16:54
You can increase the rent on a Periodic tenancy as long as it’s agreed in writing by both parties.

David Smith

17:21 PM, 27th October 2022, About 2 years ago

Reply to the comment left by Dennis Forrest at 27/10/2022 - 16:39
The letting agent wanted be to sign a new 12 month contract with a 5% rent increase and charge me 8% for the privilege.

You couldn’t make it up!!!

And landlords fall for this rubbish.

Dennis Forrest

20:31 PM, 27th October 2022, About 2 years ago

Reply to the comment left by Jay Patel at 27/10/2022 - 16:54
Hi Jay - the tenants have agreed to the small increase even though it has now switched to a periodic tenancy,
I have agreed with the tenants, (assuming they are still in occupation), that the rent will be reviewed but not necessarily increased every 12 months. This arrangement will run from the 15th December each year, the expiration of the the initial 12 month fixed tenancy agreement.

Jay Patel

20:36 PM, 27th October 2022, About 2 years ago

Hi Dennis ... that’s good to know, but I would check the legality of that. The law is very specific about changes in the rental value and if it goes up without a precondition, and that could be deemed as a prohibited payment. This wouldn’t fall under the tenant fee act and may be seen as a breech.

By the way, I’m not an expert, but something doesn’t feel right about it. Best of luck.

Dennis Forrest

20:47 PM, 27th October 2022, About 2 years ago

Reply to the comment left by Jay Patel at 27/10/2022 - 20:36
Hi again - I have been renting property since 1995 and never had a problem agreeing rental figures with any tenant. I always try and put myself in the tenants position and think if I was the tenant ' Does this seem like a fair deal?'
I never let the rent reviews go longer than 2 years otherwise you may get in to the position after say 5 years and you are then asking for at least a 10% increase which would come as a shock to most tenants.

Jay Patel

22:26 PM, 27th October 2022, About 2 years ago

That’s a very fair and reasonable attitude, Dennis ... my only real concern for you is whether you are allowed to increase the rent whilst it’s turned into a periodic tenancy. Under normal circumstances you cannot alter the rental amount unless it’s a rent review at the end of the contract. At least that’s how I’ve always understood it to be.

I would get a second opinion.

Ian Cognito

22:35 PM, 27th October 2022, About 2 years ago

Reply to the comment left by Jay Patel at 27/10/2022 - 22:26
Hi Jay. My opinion is that a Periodic Tenancy can be terminated with 2 months notice from the landlord (and 1 month fron the tenant) and so an increase will be allowable with 2 months notice.

AP

8:02 AM, 29th October 2022, About 2 years ago

As others have said, you should check your signed T&C’s of the agent in detail.

Without question the 1% should be refunded. Agents doing rent collection often make this mistake when the renewal commission reduces.

As for charging for the months where no rent was received, again it’s down to the T&C’s. Did you allow the tenants to break their contract early? In those scenarios, I always explain to the tenants that I will do everything I can to allow them to break the agreement as long as I’m not out of pocket.

First I speak to the agent and discuss the commission with them. Some agree to refund pro rata to get the future business of finding a new tenant (even if their T&C’s state they don’t have to) but many will not.

In that case, the existing tenant should be paying rent & bills up to the date a new tenant moves in, plus paying the pro rated agent commission for the time they are leaving early (and that I will have to pay again for with the new tenants).

One of the agents (a large chain) actually has this in their AST - although thinking about it now I wonder if that breaches the tenant fees act? Although it’s still technically less than the total rent owed for the period contractually. I will check this.

Agents renewal commission comes up on here all the time. It’s really down to who you want to work with and it varies massively from area to area. Some agents will negotiate their fees, some will not.

Mary Story

8:06 AM, 30th October 2022, About 2 years ago

I have had several 1 year contracts with tennants. The estate agent is only involved for the initial contract and then its a rolling contract for any further tennancy with an agreement that 2 months notice will be given if tenant leaving and 3 month if you want the property back.
If a tennant leaves a contract early IE before the 12 month term is finished then they pay any further agent fees. Not you as they broke the contract.
I

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now