What is an unfair termination fee for a letting agent?

mfz1

What would constitute to be an unfair letting agent termination fee? I ask because family friends of ours are in a peculiar position. They want to sell this buy to let they own. They aren't entirely happy with their sales team so they are considering another sales agent. Their tenancy contract with the agent says 70% of a months rent (plus vat) to terminate the contract. 

The rent is ~£1000 so that means a £840 to terminate their contract and let them self manage / give to another letting agent. It also states that if you sell with tenants, and this particular agent is not retained as the letting agent, the fee again will be chargeable.

I personally think that this termination fee is excessive, but I'm not well versed in this area, I remember many moons ago it was something like 3 months letting fees was fair? Just for clarity, their fees currently are 7/8% of the monthly rent.

moneysavinghero

If you saw that 3 months of rent was fair, why do you think that less than one months rent is unfair?

If the LA had breached their contract with you, and tried to charge you a termination fee, then that would be an unfair termination fee.

MaryNB

moneysavinghero said:

If you saw that 3 months of rent was fair, why do you think that less than one months rent is unfair?

If the LA had breached their contract with you, and tried to charge you a termination fee, then that would be an unfair termination fee.

It's 3 months worth of the letting fee vs 70% of one months rent.
Assuming an 8% fee that's equivalent to 24% of one months rent vs 70% of one months rent. 

saajan_12

mfz1 said:

What would constitute to be an unfair letting agent termination fee? I ask because family friends of ours are in a peculiar position. They want to sell this buy to let they own. They aren't entirely happy with their sales team so they are considering another sales agent. Their tenancy contract with the agent says 70% of a months rent (plus vat) to terminate the contract. - please quote exactly what it says. 

The rent is ~£1000 so that means a £840 to terminate their contract and let them self manage / give to another letting agent. It also states that if you sell with tenants, and this particular agent is not retained as the letting agent, the fee again will be chargeable.

I personally think that this termination fee is excessive, but I'm not well versed in this area, I remember many moons ago it was something like 3 months letting fees was fair? Just for clarity, their fees currently are 7/8% of the monthly rent. - that's pretty close to market standard. 

Typically lettings agent fees are to terminate with the tenant still in situ. Is the plan to sell with the tenants to another LL? If not, then the tenant will leave at some point (either via mutual surrender or S21 + courts) so does the contract still require a termination fee when the tenancy ends? Please quote exactly what the contract with the agent says.

mfz1

moneysavinghero said:

If you saw that 3 months of rent was fair, why do you think that less than one months rent is unfair?

If the LA had breached their contract with you, and tried to charge you a termination fee, then that would be an unfair termination fee.

Precisely what @MaryNB said. £240 vs £840. I don't know is why I am asking is 70% of rent a fair termination fee considering that the tenants have been there for couple of years now, so the initial 6/8/12 months whatever it was has long expired.

mfz1

saajan_12 said:

Typically lettings agent fees are to terminate with the tenant still in situ. Is the plan to sell with the tenants to another LL? If not, then the tenant will leave at some point (either via mutual surrender or S21 + courts) so does the contract still require a termination fee when the tenancy ends? Please quote exactly what the contract with the agent says.

This is what it says:
TERMINATION OF AGREEMENT
Termination of this agreement can only take place when the property is vacant. Whilst tenants introduced by X are residing in the property you may not terminate this agreement. Should you wish to take over the management or transfer the management to another Managing Agent with a tenant introduced by X, you can pay a Let Only fee (currently 70% of one months rent, plus VAT) and we will surrender our services. Should the property be sold with tenants to another Landlord and X do not remain managing agents, the let only fee will be collected from the last months rent received by X.

Where X is the name of the letting agent.

steampowered

It looks like the termination fee is only payable where you switch the management of this tenant to another agent.

It doesn't look like any fee would be payable if the tenant leaves, or if you sell the property with the tenant in situ.

isplumm

is this a B-2-B contract? If so then business is expected to have read & understood the contract - so I am not sure that this would be counted as unfair. 
Mark

greatcrested

So there is no termination fee.

You will have to evict the tenants in order to sell asuming you want the best price. Selling with the tenants in situ to another landlord is possible, but will typically take much longer (fewer potential buyers) and achieve a lower price (LLs want a bargain or will simply walk away).

So evict the tenants. The contract with the leting agent then ends without fee. You then appoint an estate agent to sell.

mfz1

isplumm said:

is this a B-2-B contract? If so then business is expected to have read & understood the contract - so I am not sure that this would be counted as unfair. 
Mark

No, its private.
I suppose, it all works IF you can sell the house within a month, if not then you are paying mortgage out of your own pocket until it has been sold.
I suppose what I will advise this couple is to get another agent to sell the house and in the mean time give the eviction notice as well, which would give them 1 month to find a buyer.
Is it bad practice to get a different agent to do the selling whilst it is currently under let by another agency? I don't see it as being bad since you have already started the termination process.

UnderOffer

I believe, due to COVID, the Landlord has to give 6 months notice now. Their tenant is going nowhere at the moment. 

Someone more knowledgeable will be able to give more info. 

https://www.gov.uk/private-renting-tenancy-agreements/your-landlord-wants-to-end-your-tenancy