Renewal Fee after 3 years?

by Readers Question

9:20 AM, 15th June 2020
About 2 weeks ago

Renewal Fee after 3 years?

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Renewal Fee after 3 years?

I signed a Terms of Business contract with a letting agent in 2014 for let only on an assured shorthold tenancy agreement for 3 years. At the end of the term my tenants and I wished to renew. The agency demanded 3 years at a negotiated 5% + tax and admin fees plus a tenancy renewal fee. The agency contacted me regarding the renewal due in July this year, again asking for 5% etc etc.

After looking again at the original terms I signed – 9.1. The Commission payable for our Let Only Service is 10% plus VAT of the total rent, premium or other monies payable by the Tenant during the initial Tenancy.
9.2. If a Let Only Tenancy continues as a renewal of the fixed term or as a periodic tenancy then our Commission is reduced to 7% plus VAT of the total Rent, premium or other monies for the Letting Service whether or not we are instructed to act on your behalf for the period noted at clause 12 below.

There are many points before clause 12 which keep reiterating commission being payable whether or not they are involved, but looking closely at clause 12 –

BASE COMMISSION
You will have to pay us a Commission at the Let Only Commission Percentage of the gross Rent, premium or other money payable throughout the initial fixed Term.
After the initial fixed term we will charge Renewal Commission if the Tenancy is renewed whether or not we are instructed to act for the Landlord if the Tenant remains in occupation for a period of 2 years.

It seems to me their demand for money after the 2 year renewal period is unlawful and dishonest. I have requested the sum for the 5th year to be returned which they responded –

“To explain our terms did change on renewal fees which are now applicable to all Landlords the whole way through a tenancy irrespective of the original terms. As a gesture of good will and given your previous terms I had agreed from here on not to charge fees when this should now be applicable.”

My terms were never previous, these are the terms. I have again asked for the 1 years fee to be returned but they have not replied.

The amount is 3.25k.

At this point should I engage a lawyer?

Paula



Comments

Possession Friend

10:50 AM, 15th June 2020
About 2 weeks ago

We NEVER recommend renewing a tenancy, but to let it continue as a Contractual Periodic tenancy ( which should be stated in the original Tenancy agreement.
if the original tenancy agreement doesn't mention this, the tenancy would continue ( if not renewed ) as a Statutory Periodic tenancy.
Just tell the agent your not renewing the tenancy and its running on as Periodic.

DALE ROBERTS

11:11 AM, 15th June 2020
About 2 weeks ago

I would appreciate it if you could elaborate on the differences between a Contractual and Statuary Periodic lease and why one is preferable to the other.

trevor white

11:50 AM, 15th June 2020
About 2 weeks ago

OFT v Foxtons Limited [2009]

A successful challenge was brought by the OFT under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) against the estate agents, Foxtons Ltd in relation to the latter’s terms and conditions of it’s lettings contracts.

The ruling confirms that not only must the terms and conditions of an agreement be drafted in clear and intelligible language but also terms which are likely to impact on a consumer financially should be communicated to that consumer before the contract is made. The effect of which would mean that any commission fees for example or charges will not come as a surprise to the consumer.

You should read the Foxton case as a guide to your legal position.

Possession Friend

11:52 AM, 15th June 2020
About 2 weeks ago

To try to be brief, Liabilities for Council Tax remain until tenancy ends and was one of the reasons that since the Leeds v Broadley case in I believe 2018, that Landlord asssociations started changing the terminology in their AST's
A Contractual Periodic is a CONTINUATION of the original tenancy, and not a separate one, so deposit defaults couldn't accrue multiple penalties, for example.
Contractual is preferred to Statutory, but Tenancy agreement has to say that's what will happen with the tenancy after the Fixed term ends ( as the NLA's ( now NRLA ) and RLA's tenancy agreements state.
If you use a small Letting Agents 'own-drafted' tenancy agreement - then you had better be very good on the legislation to detect things like the above.

DALE ROBERTS

12:09 PM, 15th June 2020
About 2 weeks ago

Thank you Chris.
So Contractual is a continuation of the AST as per the original terms but Statutory is a "new" contract if the terms of the initial AST did not determine the periodic continuation?

Possession Friend

12:28 PM, 15th June 2020
About 2 weeks ago

Reply to the comment left by DALE ROBERTS at 15/06/2020 - 12:09Yes Dale,
Also, a Statutory periodic tenancy ( called SPT ) runs for the period of the rental payment, usually monthly. It was this point that Leeds Council won their Council tax case against the landlord, as for the tenant to be liable for the Council tax, they have to have at least a 6 month Fixed term.
In the Leeds case, whilst the tenant did initially have this, their current tenancy was SPT and therefore for the length of the rental period ( a month )
We don't want to get too bogged down in the specific legalities, just for landlords to have the fact that the original fixed term will then run into a Contractual periodic tenancy ( CPT ) in their Tenancy agreements.
A number of letting agents have asked me to renew tenancy agreements, because they charge a fee for doing so, but its not generally in the landlords interest. I've heard conflicting viewpoints, ( in that it ties the tenant in for another fixed term - i.e. 6 or 12 months, but Overall, I believe the disadvantages out weight that.

DALE ROBERTS

16:05 PM, 15th June 2020
About 2 weeks ago

I shall ensure all AST's going forward include your sage advice regarding Contractual Periodic Tenancies should I agree to a tenant remaining in situ after the contract period expires if neither of us want a fixed term.
As always I am indebted to Property118 professionals who dispense advice so freely.
Thank you again Chris.

NEIL T

17:14 PM, 15th June 2020
About 2 weeks ago

Reply to the comment left by Possession Friend at 15/06/2020 - 12:28
On both rental and sales, I always carefully read the agents terms and conditions and delete anything that I don't find palatable including additional fees for renewal/continuation of tenancy and especially commission were I to sell to the tenant at some date in the future. Delete it! Get rid of it! They'll never refuse you. If they do, go somewhere else.

MasterG

17:42 PM, 15th June 2020
About 2 weeks ago

Reply to the comment left by neilt at 15/06/2020 - 17:14
Exactly this. I told my agent "I don't mind paying you to do something. I'm not going to pay you to not do something."

AP

9:03 AM, 20th June 2020
About 2 weeks ago

To the original poster, you should definitely send a letter before action to the firm and either engage a solicitor or go through the small claims process yourself.

They made a mistake here (to give them the benefit of the doubt, they probably don’t do too many 3 year contracts, and their terms seemed to have changed in that period too...) but if they are a reputable firm they should admit their mistake and refund you. Unfortunately you also made a mistake not checking the terms before paying them last time. You could also try a complaint with any professional body they are a member of (ARLA?)

The argument about renewal fees has been going on for as long as I’ve been a landlord. Personally, I’ve found in the areas I operate in, all the decent agents charge renewal fees. I’ve managed to negotiate to reduce rates and cap these at a number of years, but their standard terms state they charge the same for ever, and many landlords sign those terms. There are also some agents who simply won’t negotiate on their fees at all that I’ve had to walk away from deals from (so I know it’s a fixed rule, rather than just lip service). I’ve also tried using online portals myself and it’s just hasn’t worked for my properties / area in London. It just shows how area specific the Lettings industry and market is - it’s easy for someone who has a completely different experience to write on a forum that everyone should do what they are doing, when that isn’t always the best case for someone else.

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