Reasonable costs for tenancy surrender (no break clause)

Sensory

Absent of a break clause in an AST, the tenant “shall pay all costs, fees and charges incurred by the landlord for allowing early termination including the agent’s existing or re-letting fees.”

Besides the standard administrative fees (e.g. reference checking, check-in, deposit registration, drawing up the agreement), there is one particular item on which I’d like to seek clarification:

New Letting Fee - 18% of monthly rental.
This is the pro-rata Landlord fee from the commencement date of a new proposed Tenancy until the fixed term expiry of tenancy. To be advised when the period is known.

Does this imply the landlord already paid in advance to the agent 18% of the rental cost of the entire term of the current AST? If this is indeed the case, is it reasonable for the existing tenant to pay this amount for the entire term of the new tenancy?

I would have thought the tenant should simply reimburse the landlord’s losses by paying 18% of the monthly rent until the expiry of the original AST (in one advance lump sum if necessary minus the months already served), and the landlord is then responsible for the monthly fees of the new tenancy.

The agent, Savills, does not reimburse the landlord for any fees if the tenancy is surrendered early in the absence of a contractual break clause, which means they’re effectively double dipping?

anselld

The agent are not necessarily double-dipping, they are proposing to charge you for the fee which would normally be payable by the Landlord.  Though it obviously depends what they tell the Landlord.
The problem with early surrender is that the Landlord holds the cards as they do not need to agree it at all.  You could try to negotiate on the basis that the Landlord would need to pay the fee regardless of new tenant, but it is a negotiation and you are not in a strong position so you will need to ask very nicely.

D.L

anselld said:

The agent are not necessarily double-dipping, they are proposing to charge you for the fee which would normally be payable by the Landlord.  Though it obviously depends what they tell the Landlord.
The problem with early surrender is that the Landlord holds the cards as they do not need to agree it at all.  You could try to negotiate on the basis that the Landlord would need to pay the fee regardless of new tenant, but it is a negotiation and you are not in a strong position so you will need to ask very nicely.

They certainly are double dipping. This is the scenario I also went through. Yes, you are paying the fee which would normally be paid by the landlord. But this is a fee for a period after you will no longer be living there, and, assuming a new tenant is put in place, the agency will then charge the landlord the same fee again including that period. 

Unfortunately though this is the right answer. Not a 'fair' outcome but probably what you have to take to exit the agreed contract. 

Sensory

So if, for example, the new tenancy was for one year, and expired six months after the original AST, would the landlord not then financially benefit from six months of agent rental fees being paid by the original tenant?

Six months (original AST), six months (both ASTs), six months (new AST).

The agent double dips the second set of six months: the first twelve months being paid in advance by the landlord, and the latter twelve months being paid by the original tenant. As far as I understand, landlords should not be able to financially benefit from early surrender (even if agents can).

Here I thought monthly rental fees were charged... monthly. I’m baffled that agents get their rental fees paid in full in advance of the entire tenancy, before they’ve even started doing the work.

anselld

Landlords do not generally pay management fees in advance.  They are normally paid monthly from the rent.
If you are concerned that the Agent is double-dipping then negotiate with the Landlord directly.

Sensory

anselld said:

Landlords do not generally pay management fees in advance.  They are normally paid monthly from the rent.
If you are concerned that the Agent is double-dipping then negotiate with the Landlord directly.

I wish I could, however Savills manage the property on the landlord's behalf. The landlord is based overseas and is notorious for radio silence (even to them).

The particular wording of that cost implies management fees over the entire term are paid in advance? Am I allowed to request proof of any paid fees I agree to reimburse?

anselld

Bear in mind if you make life too awkward they do not have to agree the surrender at all. 

It seems a bit "self fulfilling" to ask them to prove their own fees.

Sensory

Well it wouldn't be asking Savills to prove their own fees, it would be ensuring the landlord actually paid those fees and is thus at a loss and in need of reimbursement. I'm still awaiting clarification on whether the landlord actually paid a lump sum of management fees covering the entire tenancy term in advance, because it's the only explanation for including such a fee as part of Early Surrender (and even then, it's not entirely fair because it's not directly reimbursing the landlord's losses).

Sensory

Savills confirmed, as stipulated in their Standard Terms of Business, that monthly rental commission for the duration of the tenancy was paid in full (12 months) by the landlord at the start of the tenancy.