Managing agent cancellation fee

Becs75

Hi,

We let our property through a local agent in Kent in April 2008. We took up their management service as it was the first time we had let a property and was unsure what the Tenants would be like.

We paid 1/2 months rent + VAT as a letting fee and have been charged 8% management fee per month for the last 2 years.

The tenancy is up for renewal in April and as we have a very good relationship with the Tenants (they contact us on all management issues of which there have only been a few) they have confirmed to us that they wish to renew for a further year.

As the agent really hasn't had to earn their management fee for the last 2 years we have decided to cancel the service and take over the management ourselves.

We signed a Management Service Agent Agreement when we originally let the property in 2008 and under cancellation charges it states that should we wish to cancel management then we would need to give 3 months notice and if the tenancy was going to continue we would need to pay 1/2 one months rent + VAT as a cancellation fee.

My argument is that the original Management Service Agent Agreement we signed in April 2008 does not refer to dates or any subsequent renewals of the agreement therefore we assumed that the cancellation fee would only be relevant after the first year of the tenancy and certainly not 2 years later.

In effect by having to give 3 months notice on the management service (something I have no problem with) plus 50% of one months rent, we are paying the equivalent of 10 months management fee for the agent doing NOTHING.

If there any argument in this or as we have signed the agreement are we bound by its terms? I feel the charge is wholly unjustified and would appreciate anyone elses advice/ experience in this sort of thing.

Thanks!!!

G_M

Yes I agree. It sounds exhorbitant. I'm not sure whether you'd be bound by these terms but suggest.
1) To start with, give them the 3 months notice in writing immediately. You can sort out the rights/wrongs of this in the intervening period. Short, polite (thank them for their service over the years) and DON'T raise the fees issue.
2) join a landlords association : NLA or RLA or a local one. a) they will advise on this and b) it will be very helpful to you in self-managing
3) Also check out Landlordzone. Might be worth posing this Q there too. lots of experienced LLs. (though one or two here too - prob along in a minute!)
4) Ask the tenants if they'd prefer to move to a preriodic tenancy in April rather than a new 12 month AST. The terms are identical except that it can be ended at any time by the LL giving 2 months notice and the tenant giving 1 month (broadly). The advantage here, depending on the precise wording in your management contract, might be that as a new tenancy is not being set up with the existing tenants, the half month fee might not be payable. It's a long shot, but may help.
5) Later on, argue that the terms are unfair terms and therefore unenforcible. Seek advice on this (CAB? lawyer?) or RLA/NLA can help here.
6) ultimately, if you stand firm and/or offer a compromise, it is the agency which will have to decide whether to sue you, with all the attendant costs, hastle and risk, not you that will have to do anything (except respond). (though see my next points!)
7) Talk to the tenants - you sound like you have a good relationship - and explain what's happening. Make sure they start paying YOU the rent not the agent - it might even be an idea to ask them to do this immediately so the agent is not in control of your money once any dispute blows up. You can always pay the agent their 8% for 3 months directly rather than (I assume) them taking it from the rent they now collect.
8) don't escalate this with the agent too soon ie by questioning their fees, especially if they are holding rent money of yours. Get more information on your legal position first, and get yourself financially in control too. That way, they will have to sue you for their 'fees', rather than you having to sue them to get back rent money they hold.

I need hardly remind you to ensure you comply with all the regs about renting (gas, deposit, etc etc - again, RLA/NLA will help here)

Let us know how you get on.

Becs75

Sorry for the delay, I have had a bit of a hectic week and thanks for your response. I will contact our Tenants to discuss the situation and look at the landlords associations that you suggest.

Will report back with the my findings/ the outcome!

philipchild

Hi,
I am in a similar situation and wondered how you got on?

Thanks,

1ipstick

I'd be interested too as I want to let directly to my tenants but Letting Agency want 3 months' termination notice- although I'm at the end of my initial 'tenancy term'.

Any advice?