Estate agent increased fully managed letting fee percentage with no escape clause - was this legal?

HouseMoo

I'm a landlord and use a letting agent for full management of a property, of which they take 10%+VAT. We had been using them for over a year, and towards the end of last year, they sent out communication they were increasing this to 12%+VAT with immediate effect (which is an increase in management costs of 20% from what we were paying before, which is not insignificant)

We responded with our disapproval of this, and were provided with three options:

1. They offered increasing to only 11%+VAT (which is still a 10% increase over current rate)
2. We drop to their rent only, which they again had also recently increased, or 
3. We cancel and self-manage which would take three months and cost us a full one months rental income + VAT

Due to the above, and given other issues we had previously with their handling of the property, we no longer trusted them, we wanted to just get out so we chose option 3. This meant three months paying the increased management fees, followed by a full months rent + VAT loss.

However, a colleague has said that this potentially wasn't legal with them putting us in this position, either take hit of higher costs or pay penalty for cancelling. And the question here is, are there grounds for a complaint? The terms of business do list a very generic line saying: "I/We accept these terms may be subject to change. Notification of such change will be provided to you." and I'm wondering whether this is a catch all to allow them to substantially change the terms of the contract at any point, but surely there must be some legal protection around this. They increased their prices with no way of opting out without significant penalty.

I know we have the option of raising an issue with the Ombudsman (TPO), however they first suggest we raise a complaint with the agent, but I really want to know first whether this legal/acceptable for them to do. Do I actually have grounds for a complaint to try and recover some costs we incurred due to their mandatory increase? Or do I just have to write this off and move on.

Thoughts and opinions welcome, or even better if anyone has been in the same situation or has knowledge of any relevant contract law!

- HouseMoo

propertyrental

If you have a signed contract wth the agent, showing a charge of 10% + VAT, then that is what you and they have contractually agreed.

If they wish to renegotiate that contract, they (like you) are free to offer new terms. You are then free to accept or decline the new terms. If you decline, the original contract should stand.

Unless of course there is a clause in the original contract (that you agreed to) allowing them to increase their fees, usually by a specified amount, and frequency, and with appropriate notice. Much as tenancy agreements often have clauses that tenants agree to allowing landlords to increase the rent.

Is there?

Personally I would want to get rid of this agent. Yes, use their published internal complaints procedure and unless they agree to revert to 10% (or better still release you from the contract completely, immediately), go to the TPO. Also yes, serve the notice, but start the process immediately of getting the tenant to either pay you direct, or pay a new, carefully selected replacement agent.

Remember, if/when you part ways the agent is holding any rent of yours, you will have to fight to get it. If they hold no money of yours, they will have to fight for any fees they claim you owe. Possession is 9/10s of the law.....

Read
Post 9: Letting agents: how should a landlord select or sack?

However you may have shot yourself in the foot:

we wanted to just get out so we chose option 3. 

What exactly did you say and how? Depending on the answer you may have contractually agreed to pay one months rental + VAT

as for

 "I/We accept these terms may be subject to change. Notification of such change will be provided to you." 

I don't believe this adds anything to normal contract law. Any contract can be subject to change- provided both sides agree.....

sourpuss2021

12% let alone 10% seems extremely cheap for fully managed service.  

By way of comparison you would be looking at 20.4% (including VAT) to use one of the big national firms like Winkworths or Foxtons.

I wonder in fact how such incredibly cheap rates are possible!  Is there cutthroat competition between local agents in your area?  How lucky you are!

saajan_12

sourpuss2021 said:

12% let alone 10% seems extremely cheap for fully managed service.  

By way of comparison you would be looking at 20.4% (including VAT) to use one of the big national firms like Winkworths or Foxtons.

I wonder in fact how such incredibly cheap rates are possible!  Is there cutthroat competition between local agents in your area?  How lucky you are!

  Anyone I know using an agent is on 8-10% first year, with the commission going down 1-2% each year the same tenant stays (as there's usually less to do and they've recouped the advertising costs), so current may be mid single digits. This is both for local agents and for chains. 20% is madness!

HouseMoo

@propertyrental Thanks for the reply and useful response!

Unless of course there is a clause in the original contract (that you agreed to) allowing them to increase their fees, usually by a specified amount, and frequency, and with appropriate notice. Much as tenancy agreements often have clauses that tenants agree to allowing landlords to increase the rent.

Is there?

There is no clause in the terms of business about the main rates, only a section regarding additional fees which they say may vary periodically. The 10%+VAT however is listed on the signed terms of business, so I think we are good there.

However you may have shot yourself in the foot:

we wanted to just get out so we chose option 3. 

What exactly did you say and how? Depending on the answer you may have contractually agreed to pay one months rental + VAT

This is the part where yes, we should have identified / raised the complaint before we chose an option, as in doing so as you say we have likely agreed to the cancellation fee. I did say in my email response to the options that we wanted to give our three months notice and switch to self-managing. However it was our understanding at the time these were our only choices and this was a legitimate increase. So yes, this action may have thrown a spanner in the works.

I've requested their complaints procedure, and will read through the post you shared on sacking an agent. 

sourpuss2021

I think you’d get more answers if you tried posting this on LandlordZone forum.

I might have been slightly wrong about Winkworths by the way.  It looks like their rates vary between offices and may be a bit lower. But 20.4% (or 17% excluding VAT) is indeed the figure for Foxtons.

_Penny_Dreadful

sourpuss2021 said:

I think you’d get more answers if you tried posting this on LandlordZone forum.

I might have been slightly wrong about Winkworths by the way.  It looks like their rates vary between offices and may be a bit lower. But 20.4% (or 17% excluding VAT) is indeed the figure for Foxtons.

Anyone who uses Foxtons and is willing to pay those ridiculous fees has a head that buttons up the back. 

@saajan_12 is right, 10% is the kind of fee letting agents charge across the UK. 

_Penny_Dreadful

HouseMoo said:

@propertyrental Thanks for the reply and useful response!

Unless of course there is a clause in the original contract (that you agreed to) allowing them to increase their fees, usually by a specified amount, and frequency, and with appropriate notice. Much as tenancy agreements often have clauses that tenants agree to allowing landlords to increase the rent.

Is there?

There is no clause in the terms of business about the main rates, only a section regarding additional fees which they say may vary periodically. The 10%+VAT however is listed on the signed terms of business, so I think we are good there.

However you may have shot yourself in the foot:

we wanted to just get out so we chose option 3. 

What exactly did you say and how? Depending on the answer you may have contractually agreed to pay one months rental + VAT

This is the part where yes, we should have identified / raised the complaint before we chose an option, as in doing so as you say we have likely agreed to the cancellation fee. I did say in my email response to the options that we wanted to give our three months notice and switch to self-managing. However it was our understanding at the time these were our only choices and this was a legitimate increase. So yes, this action may have thrown a spanner in the works.

I've requested their complaints procedure, and will read through the post you shared on sacking an agent. 

When letting agents die they go to a circle of hell where they’re doomed to listen to children playing “Morning Has Broken,” on the recorder for the rest of eternity. 

Definitely make a complaint and escalate to whichever redress scheme they’re registered with if you’re unhappy with the response you receive. Is the deposit protected under your name or theirs and do you have copies of all the prescribed information? 

sourpuss2021

_Penny_Dreadful said:

sourpuss2021 said:

I think you’d get more answers if you tried posting this on LandlordZone forum.

I might have been slightly wrong about Winkworths by the way.  It looks like their rates vary between offices and may be a bit lower. But 20.4% (or 17% excluding VAT) is indeed the figure for Foxtons.

Anyone who uses Foxtons and is willing to pay those ridiculous fees has a head that buttons up the back. 

@saajan_12 is right, 10% is the kind of fee letting agents charge across the UK. 

Really?  That seems absurdly low if we are talking about a fully managed service.

Here’s a branch of Winkworths:

steampowered

The agent cannot just change the terms of the contract without your agreement.

If they were able to do that, they could say the management fee is now 200% of the rent for the next 3 months!

You will be required to pay them for the 3 month notice period but only at the agreed fee of 10%.

_Penny_Dreadful

sourpuss2021 said:

_Penny_Dreadful said:

sourpuss2021 said:

I think you’d get more answers if you tried posting this on LandlordZone forum.

I might have been slightly wrong about Winkworths by the way.  It looks like their rates vary between offices and may be a bit lower. But 20.4% (or 17% excluding VAT) is indeed the figure for Foxtons.

Anyone who uses Foxtons and is willing to pay those ridiculous fees has a head that buttons up the back. 

@saajan_12 is right, 10% is the kind of fee letting agents charge across the UK. 

Really?  That seems absurdly low if we are talking about a fully managed service.

Here’s a branch of Winkworths:

Why do you think it’s absurdly low? What do you think a fully managed service from a letting agent involves? Mostly it’s just collecting the rent, skimming a bit off the top and then passing what remains on to the landlord. Nice work if you can get it. Sure, there might be the occasional question from the tenant that the letting agent forwards on to the landlord but that’s about it. Everything else incurs additional fees e.g. tenant find, referencing, inventory and advertising is not included in the fully managed fees. There’s an extra charge for organising repairs plus letting agents tend to use contractors from whom they get a kick back. 

Have you ever actually engaged the services of a letting agent to manage a property on your behalf?