Selling a property with tenants, letting agency agreement fees question

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    Selling a property with tenants, letting agency agreement fees question

    Hi All,

    I've had a search and not found a response to the query I have. I am selling a flat with tenant in situ. The property was rented through a lettings agent who provided what is effectively a lettings only service (although the landlord agreement states they don't provide such a basic service (I assume for legal reasons!)). I agreed fees with them of 6% Year 1 and 4% Year 2. The special instructions section of the landlord agreement I signed states "Renewal fee agreed at 4% + VAT". The AST signed was a two year contract split into two periods.

    I spoke with the lettings agent and they maintain that a new tenancy agreement is required to reflect the sale/new landlord. They also want to charge the buyer 8% for Year 1 and 6% for Year 2 for the new tenancy; this would be unattractive to the new buyer obviously. Now, I know that a tenancy agreement survives in the event of a sale but I don't know what happens to a landlord's agreement? I have reviewed the agreement and while there is plenty about what happens if there is a change of tenant, there doesn't appear to be anything about a change of ownership of the underlying property.

    There are sections in the landlord agreement which are bolded:

    "Any extension, continuation or holding over of the Tenancy either for a long term let or a short term let is subject to the same rate of fees as the Letting Service or Short Let Service (whichever has been agreed) as shown in the Confirmation of Instructions section below." Note that the Confirmation of Instructions section includes the wording above "Renewal fee agreed at 4% + VAT".

    The 'Tenancy' is defined as "the entire period that the Tenant remains in occupation of the Property including any extension or renewal or period of holding over whether by way of memorandum, verbal or written agreement, operation of Law or otherwise"

    To my mind, the worst case should be that the existing tenancy carries on until the end of the 2nd year and if renewed thereafter, a commission would be payable of 4% for each further year. Does anyone disagree? In the circumstances, is it better to try to negotiate a termination fee with them?

    Thanks in advance!

    #2
    They are lying:

    A tenant does not have to agree to any new tenancy nor agree to any changes to the tenancy, the old one is perfectly valid. However the new owner needs to serve certain notice(s) compliant with s48 & s3.
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      Thanks - very helpful to know about the notices required. But what do you think is the position re letting commissions in the future - do you think the letting agent is entitled to a 4% per annum commission in the event of a renewal at the end of Year 2 (with same tenant and new landlord in place)? Does the landlord step into the landlord agreement as they do the AST? Or do they have any right to commission at all?

      Comment


        #4
        Don't renew: Carry on as periodic. Simple.

        But I can't read your agreement/terms&conditions with agency from here (nor do I want to). In your shoes I'd simply give them notice that you are ending the contract.

        NB Notices & new owner/landlord. If not sorted you (yes, YOU!) - the "old" landlord remain responsible for certain matters - see s3 here..
        http://www.legislation.gov.uk/ukpga/1985/70/section/3
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          Thanks again, I've made a note to make sure the notices get done.

          Re periodic tenancy, this is covered in the renewals section of the agreement:

          "Any extension, continuation or holding over of the Tenancy either for a long term let or a short term let is subject to the
          same rate of fees as the Letting Service or Short Let Service (whichever has been agreed) as shown in the Confirmation of
          Instructions section below. The Renewal Service fee is paid in advance and where possible deducted from Rents received. If the
          Tenancy becomes a Periodic Tenancy then the Renewal Service fee is paid quarterly in advance or pro rata thereof."

          The agency is a national chain so I would imagine their agreement is 'best of breed' so to speak. Does this change your view?

          Comment


            #6
            I've done some more reading on this topic over the weekend and it appears the Foxtons case led to guidance which covers my scenario. In particular, the Competition & Markets Authority Guidance to Lettings Professionals from 2014:

            "CMA considers the following terms, in particular, are likely to be found to be unfair. As such they would not bind consumers even if they had signed a contract agreeing to be bound by them, and therefore we consider they should not be used or relied upon in contracts with consumer landlords:

            Terms which require landlords to pay agents renewal commission after the sale of their property to a third party (‘third party renewal commission’) because the original tenant remains in occupation."

            Any views on this? It seems clear to me but would welcome the experienced views of the forum.

            Thanks!

            Comment


              #7
              your OP says they want to charge the buyer a fee - I don't see how they can, the buyer has no legal agreement with them !!

              you have a contract with them, the new buyer doesn't.

              Comment


                #8
                The agent can't charge the buyer anything (unless the buyer chooses to contract with them).

                They've misadvised you of the position to their benefit.
                There's no possible way for you or the agent to require a new tenancy agreement in any case - what they're asking is impossible to guarantee to deliver and they should know that.

                At this point, I'd be simply telling them to f**k off.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment

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