Contracts with letting agents

How can I terminate my connection with my letting agent is a topic that landlords frequently ask.

Landlords may desire to part ways with their letting agent for a variety of reasons and wonder how to go about doing so.

There are often two reasons for requests to terminate:

1. The landlord wants to renew the lease directly with the tenant and take over management at the conclusion of the initial term in order to avoid paying an agency renewal fee.

2. The landlord expresses dissatisfaction with the agency's performance throughout the tenancy, and/or the connection ends entirely.

The industry standard and generally acknowledged rule regarding landlord-agent relationships is that the agent will be maintained with renewal fees due until the tenant vacates once they have been introduced to and signed up for a tenancy on a full management basis.

Whatever you agreed upon with your agent when your relationship started is something you are bound to abide by, failing which the courts will award damages and costs against you. A contract is a contract, and a court of law will enforce it.

The agent has the power to hold the landlord accountable for the contract unless there is really poor performance and obvious breaches.

Good renting agents will include a firmly written clause in their contract that states that ongoing fees, including those for tenancy renewals, will be due as long as one of the initial tenants or licensees the agent referred to the landlord is still residing in the property.

Where a landlord unilaterally terminates a contract, some agents will be willing to take the matter to court, and the courts will typically uphold the contract where the provisions are thought to be fair and reasonable.

Although there are statutory regulations and codes of conduct, such as The Unfair Terms in Consumer Contracts Regulations 1999, the Office of Fair Trading (OFT) and the courts do not like to see contracts tying businesses and consumers into open ended long-term agreements. Instead, the courts will determine whether business contract terms are fair and reasonable.

Additionally, every reputable agent belongs to one of the major professional organizations for agents. These have their own standards of conduct that provide landlords with some sort of recourse if an agent's behavior deviates from what may be expected of them under the circumstances. Additionally, they have client money protection policies in place (now a legal necessity), which safeguard landlords and tenancy deposits in the event of an agent's insolvency.

 

Good agents will always be a part of one or more of these associations, regardless of the legal requirements:

- National Approved Lettings Scheme

- Association of Residential Letting Agents 

- NALS 

- The National Association of Estate Agents 

- NAEA 

- The Royal Institution of Chartered Surveyors 

- RICS

- The Property Ombudsman Service

 

In order to give renters and leaseholders a simple way to hold their agents accountable, ALL renting agencies must now register with one of three redress systems. The redress mechanism will thereafter be open to anyone who feels they are receiving a subpar deal from their letting agent, and they may be eligible for reimbursement.

Since October 1, 2014, this has been a prerequisite under the law.

You can resolve a disagreement between landlords and their letting agents with the aid of letting agent redress programmes.

The programs that assist in mediating conflicts between landlords, rental agents, and tenants concerning letting agent shortcomings are open to complaints from both landlords and tenants.

Landlords may file complaints with one of these programs after using the letting agent's internal complaints process to no avail.

Which plan the letting agent is a part of must be made very clear. The three government-sponsored programs are:

Property Ombudsman Services provided by The Property Ombudsman (TPO)

Property Redress Program

Any branch of a letting agency that refuses to enroll in one of these programs may be subject to a fixed penalty fine from the local council of up to £5,000.

Additionally, all letting agents must currently (as of July 2018) have client money protection (CMP) insurance in place.

 

Termination Clause

A landlord/agent agreement should typically include a termination clause and a notice period to account for scenarios where either party decides to discontinue the partnership.

A once-and-for-all termination cost (equal to an introduction fee) that might be, for example, something like a three month or six month management fee comparable is one way to accomplish this for the landlord, ideally in a polite and agreeable manner.

If a landlord has provided what is deemed to be acceptable termination pay, this would work in his or her favor. These conversations should be recorded in writing in case the disagreement goes to court. The offer of compensation is typically accepted because, in any case, the majority of agents would not wish to pursue the matter for amounts under a few hundred pounds.

Keep all communication and notes from discussions, especially in cases when the agent has performed poorly, as documentation is the key to success in any dispute. The key to winning any issue is solid documentary proof.

Agents have overheads, such as all the typical business staffing and office expenditures, insurance, professional fees, etc., must be covered. Landlords should keep this in mind.

Furthermore, their prices cover more than just the service they perform for you or have performed; they also cover any additional work that may be required, such as showing up on a holiday weekend to replace a leaky pipe or blown fuse.

A good professional agent is "worth his or her weight in gold" when it comes to ensuring the letting is compliant with the law, therefore landlords should keep this in mind as well given the increasingly complex requirements surrounding the management of rentals.

If the landlord has not agreed to anything in writing with the letting agent regarding renewals, renewal fees, etc., a let-only arrangement immediately ceases when the letting is complete and the tenancy begins, therefore there is no contract in those situations.

The Foxton's case verdict had an impact on renewal fees, but only in the sense that they shouldn't be excessive and shouldn't contain any ambiguous language.

The verbal contract cannot specify termination rules, renewal fees, etc., so it's just an open ended arrangement where the landlord is expected to continue paying the management fees. This is a situation where there is no written contract between the landlord and the agent, one that you would not expect when dealing with a professional agent, though it is still surprisingly common.

In the event of a legal dispute, a court would typically assess what conditions of a contract should be inferred from the parties' behavior and what is fair under the circumstances in light of customary business practice.

But most agents wouldn't risk ruining their image by going to court for a few hundred pounds.

Landlords should keep in mind that it's better to have contracts with their agents in writing and caveat emptor - buyer beware - read the fine print, negotiate, and delete terms before signing if you are unhappy, and ideally deal only with agents of reputation.

Landlords should pay close attention to any agreed costs that are excessive or estate agency fees that would be due in the event that the rental property were to be sold.

 

How do I terminate my contract with the agency?

1. Do you feel you have strong reasons to terminate both legally and morally, and are you experienced and confident enough to take on the obligations of managing the property yourself?

2. Examine the contract carefully to see what you have agreed to. Are the terms of the contract reasonable and fair, and is there a reasonable termination clause that allows you a way out?

3. Recognizing that the agent has a right to some notice and remuneration; are you able to reach a mutually agreeable agreement?

4. Is the agent willing to release any outstanding funds, hand over the tenancy file with all the documents, including the tenancy agreement, deposit protection information, gas check certificates, EPC certificates, etc., and transfer management of the tenancy to you by getting in touch with the tenant, including rearranging the details of the standing order rent payment.

5. If none of this works, are you ready to present solid arguments and solid documentary evidence in court?

Since you are the property's owner and the agent is always acting on your behalf and following your directions, you are free to do as you choose with the property. However, if you anticipate just firing your agent without cause or merely because you have become tired of paying fees, you should keep in mind that whether a written contract exists or not, your renter has developed a relationship with the agent.

There is the trouble of persuading the renter mid-tenancy of the safety of his or her deposit. The tenant may or may not be delighted to transfer responsibility from the agent to you. Some tenants appreciate the independence and professionalism of an agent. In the end, you can also lose a tenant and an agent.

As it was already mentioned, good agents are like gold dust; if you have one who maintains your property and renters properly and saves you a ton of effort, why change?