Getting rid of the letting agent and signing with the tenants direct

Disjoint

Hi priceless community - coming over to get some advice on this one.

Short version: We get along with the tenants, tenancy is ending in February and I want to sign a contract direct with them and NOT pay the agency commission anymore. The term of business saying that I am still liable to pay commission to the agency if I contract the tenants on my own was signed with CHARD, and that agency was later acquired by DEXTER and I have not signed any new terms of business with them.

Long version: Background - we own a house with 4 tenants, they have been there for five years and none of the original tenants are in the house (they just rotate and the agency pockets the background check money every time a new one replaces an old one, and charge them every time we get a new contract signed to prolong the fixed term tenancy). I had agreed 8% first year, 6% thereafter - agency obviously didn't follow through and I had to go through 3 months of email for them to honour the 6% clause.

The agency was Chard (acquired by Dexter). I do all the managing myself, they just pocket the cash for having found the original tenants.

After having realised that they were cheating me for 3 years, and having had to prove this by finding old email trails and then not getting the hint of a sorry I want to be done with them.

The term of business were signed with Chard and they were bought by Dexter later. Can I tell them off in February?

Any stories etc... Always welcome!:beer:

(Incidentally, by getting rid of the agency I won't raise the rent to my tenants, they won't have to pay stupid fees for renewal and changing tenants, everyone will be just a lot happier!)

theartfullodger

1st things 1st. Get copies of ALL paperwork -tenancy, deposit, etc etc. Having done that instruct (WRITING - keep copy) tenants to pay you direct.

Then fire agent.

They may still be entitled to their ,.% - read agreement with agent.

No need for new tenancy, it limits your options (eg eviction), old one carries on as periodic.

G_M

No need to sign anything with the tenants. You already have a tenancy agreement with them. Let it continue on a periodic basis. To understand that, read:

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

as for the agent, read:

* Letting agents: how should a landlord select or sack?

we own a house with 4 tenants, they have been there for five years and none of the original tenants are in the house (they just rotate and the agency pockets the background check money every time a new one replaces an old one, and charge them every time we get a new contract signed to prolong the fixed term tenancy).

This is unclear, but sounds like a poorly managed tenancy. If a tenant changes, the agent cannot simply 'rotate'. Either

1) the tenancy must be ended, the deposit released and returned to the tenants (following a check-out inspection to look for damage, loss etc), a new tenancy in new names be created, a new inventory prepared and signed, and a new deposit taken and protected.

or

2) a Deed of Assignment must be Executed (with a witness to each signature), and signed by each existing tenant, the new tenant, and the landlord or agent.

Are they doing either 1) or 2)?

Disjoint

Hi - thank you for your reply. Makes sense to not renew and let it run on a periodic tenancy, I didn't even think about that.

What would generally happen is my wife would sign a new tenancy agreement every year and the new tenants that moved in would be signed on the new lease. During the year if a new tenant would move in to replace an old one the agency would simply run a background check and ask us if we were ok with it, no new tenancy agreement would be signed.

Regarding the deposit the tenants have paid - I understand the money is with a third party, is there anything for me to do there in regards to the agency? I'll look into the sacking link you have posted, thank you.

bizwax

Pre-warning: I am not a lawyer and this is not legal advice.

OP. Sounds like you want to break from the agent.

I would say this is a fairly simple case of contract law, which Dexters will be well versed in. An AST with tenants is one thing and there may be an overlap in how you execute the sacking of Agent, but the contract I am referring to is that of one for professional services between yourself and Dexters. While you signed with Chard, I would say that makes little difference, unless there is a clause that makes allowances for "change of control" of Chard.

When you say that the agent "pockets" the fee for background check, that implies they aren't performing the check. If they are not actually performing they check (you will need proof), then I would imagine you can fire them for cause, with immediate effect and possible argue their liability for any (potential) damages from non vetted tenants.

You will need to see what types of break clauses there are in the contract, which cater for this. It could very well be the case that the commission is due in perpetuity for any existing tenants, until they leave.

If the contract is rigid, you could probably just terminate the contract for new tenants and serve it out with existing tenants. Meaning, you would pay commission on the existing tenants but not the new incoming ones.

Also, if you have an electronic copy of the contract, would you mind posting a redacted version?

steampowered

Is the fee you are paying for sourcing the tenants or is it for collecting rent/managing the property?

If the fee is for sourcing the tenants, I imagine your contract will say that you must continue paying the fee for any tenant sourced the agent for so long as they are in the property.

If that is the case you will be liable to continue paying the agent for the current tenants.

You won't have to pay the agent for future tenants - so long as you do the find the tenant, handle the tenancy agreement and deal with the rent/deposit yourself.

Disjoint

Hi @c-j-h, my apologies for my wording. They are performing the background check and just making money on the back of the tenants for it, nothing fishy that I am aware of. They are just charging the tenants 5x the cost of a background check which is what I meant by pocketing the fees (I believe most agencies do the same).

The fee I am paying @steampowdered is for sourcing the original tenants five years ago. Since then the tenants have suggested new tenants to the agency every time they are looking to move out. I looked at the old terms of business with Chard and they are pretty air tight and specifically mention that any tenants introduced by current tenants will keep Chard whole in terms of fees.

The terms end in February - I am going to look at signing a new contract direct with the tenants and look at my options in terms of fighting off Chard. If they don't receive the rent it will be a lot harder to claim their commission. There have been some irregularities on their part and will see what else I can find. I need to figure out the deposit, but unless I am mistaken this should be held in an escrow account and the agency surely can't be responsible for it?

G_M

Disjoint wrote: »

Hi @c-j-h, my apologies for my wording. They are performing the background check and just making money on the back of the tenants for it, nothing fishy that I am aware of. They are just charging the tenants 5x the cost of a background check which is what I meant by pocketing the fees (I believe most agencies do the same).
So why have you let your agent 'make money off the back of the tenants' for so long?

All you had to do was instruct your agent to let the tenancy go periodic. Result? happy tenants. And happy tenants are better tenants.

The fee I am paying @steampowdered is for sourcing the original tenants five years ago.
What?:eek: That's all they have done? You're not paying them a management fee to collect rent, manage repairs, whatever?
Just an ongoing fee for a one-off job 5 years ago? :eek:
Since then the tenants have suggested new tenants to the agency every time they are looking to move out.
So in effect the tenants are managing the rental? :rotfl: The agent and you do f-all???
I looked at the old terms of business with Chard and they are pretty air tight and specifically mention that any tenants introduced by current tenants will keep Chard whole in terms of fees.
Please quote the exact wording.

I doubt this would stand up - follow my guidance in previous post and see what action te agent takes.

The terms end in February
What terms? The terms of your contract with the agent?
- I am going to look at signing a new contract direct with the tenants
As previously advised - why? Just let it go periodic. No action required by you or the tenants.
and look at my options in terms of fighting off Chard. If they don't receive the rent it will be a lot harder to claim their commission.
As advised previously in post 3 above.
There have been some irregularities on their part and will see what else I can find. I need to figure out the deposit, but unless I am mistaken this should be held in an escrow account and the agency surely can't be responsible for it?

You are the landlord, so you are legally responsible for
a) ensuring the depost is registered as per the Housing Act
b) returned to the tenants when the tenancy ends (Note - that means EACH tenancy).

However, depending on the contract you agreed with the agent (which we can't read), you may have paiid your agent to register the deposit on your behalf. If so, it will be in the agent's name and you'll need to get it transferred into your name.

bizwax

OP, this is getting complicated to say the least. There are many strands going on here. There are a number of intertwined strands related to two contracts:

• Your relationship and responsibilities with your tenants
• Your relationship and responsibilities with the agent that you have employed

You will need to be very careful to isolate the two and ensure you don't fall foul of anything. If you are not confident you can separate the two strands then you need to consult with a solicitor.

Note: The deposit issue raised is a serious one and can be costly if you break the law on this. Who is responsible for managing the deposit and get those ducks aligned ASAP.

I suggest two next steps which you should help.

1. Determine and specify here what exactly you have employed the agency to do.
2. Do some math and identify how much is going to agency each year. IMO, you could consider 2 to 3 times that amount as your legal war chest to fight this, should it come to it. That would be lawyer fees etc.
3. Write to your letting agent informing that you wish to terminate your relationship with them and that you want to stop paying them fees asap. This should be friendly in nature unless you have reason to believe they are in breach of contract, which changes everything. I don't believe you think this though. In the letter ask the agents to outline steps required for you to make you free you of all liabilities to agent.

Step 3 should help a lot and help you determine what it will take and how much to get out from under the agent. If it will cost a lot i.e. many years in fees, fight it. I don't suggest you don't do anything rash such as refuse to pay agent etc. They will be well versed in the contract and will have no problem enforcing it. It will be more pleasant if you end up fighting them to break the contract rather than do that and also have them pursue you for fees.

P.S. With regard to the agents making a profit off the background checks. Nothing wrong with that and I applaud them if they are making margins as high as you state. We live in a capitalist society and the agent is a professional services firm. Processes such as what you have employed them to do is how they make their money. They are simply buying the background check service from a supplier and selling it to you for a higher fee. Simples.

I also applaud you for wanting to sack them, due to high fees. You are playing a small part in the effect of "market forces" and if enough people do the same agent fees should come down. That said, it's unlikely to happen any time soon.

Also don't do anything hasty with the existing tenants, but I would tell them that going forward any tenants should be referred to you and not the agents.

G_M

I disagree with c-j-h above.

As outlined in my link (post 3) I would not make contact with the agent till all your other ducks are in place, in particular communication with the tenants and re-direction of rent payments.

steampowered

Disjoint wrote: »

The fee I am paying @steampowdered is for sourcing the original tenants five years ago. Since then the tenants have suggested new tenants to the agency every time they are looking to move out. I looked at the old terms of business with Chard and they are pretty air tight and specifically mention that any tenants introduced by current tenants will keep Chard whole in terms of fees.

Ah, I see.

The position is unfortunately as I suspect. It doesn't sound like you will be able to stop paying commission for the current tenants.

What I would suggest is that, next time someone wants to change tenancy, you tell them to go through you rather than the agent. If you keep the agent out of it you won't have to pay fees for the outgoing tenants.

If you can point to a specific 'breach of contract' by the agent you could use that as a basis for terminating the contract and refusing to pay commission, but you'd need something fairly serious to legally justify that.

You could just ask the tenants to pay commission to you direct rather than the agent, and stop paying commission. That could potentially put you in dispute with the agent - you'd have to see whether the agent started pursuing things legally (for example whether they send you a formal legal 'letter before action') or not.

The deposit should be placed with a deposit protection scheme, not held by the agent. That shouldn't be a problem so long as you can get the registration details and find out what scheme the deposit is registered with.