Letting/management agent increasing management fees

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    Letting/management agent increasing management fees

    Hi,

    I have received a letter from my letting/management agent, saying that from the 1st of April they are going to increase there percentage by 2%+VAT. They are stating that the reason for this is that their costs have increased over the past years. I have been with them for aprox 18 months and when i first agreed for them to act as my agent i agreed a fee of 9%. I have a signed agency agreement form that clearly states this figure and there is no mention on the form that they have the right to increase the fee at there discretion.

    I therefore believe that legally they can not increase their fees without me signing a new agreement and to do this they would firstly have to give notice of cancelling the current agreement (3 months notice) and then request that i sign a new one at which point i would be free to go to another agent without the £350 penalty stated in the agreement.

    Can someone please advise if the above assumption is correct?

    Is anyone else seeing agents increase fees?

    Thanks

    #2
    Think you are correct. I'd probably write/email back thanking them for their kind offer but asking where on the signed agreement they have the right to enforce increase.

    Suspect many agents will try this, quite a few landlords will simply agree, due to banning of fees:

    Could be worse, could be scotland where tenant fees have been unlawful since 1984...
    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
      Is that a 2% increase on their existing 9% (ie. to 9.18% overall) - or an increase to 11% overall?

      It's a big difference.

      An increase to 11% would be a 22+% increase of their fee.
      Everyone would like it if they could put their fees up by 22%.

      Comment


        #4
        Rightmove force an increase of between 10-20% per year on agents, must keep the shareholders happy.
        <a href="http://www.manchesterpropertygroup.co.uk/" target="_blank">Manchester letting agents</a>

        Comment


          #5
          nukecad,

          It increases the fee to 11%+VAT, as you said thats an increase of 22%, which makes me suspect that its more to do with the banning of fees rather than an increase in their running costs. Interestingly the letter also references the banning of fees coming into force and does suggest that i might like to increase the rent to "counteract" some of the cost.

          I have checked the agreement again and the fee percentage is clearly stated and i cant find anything that says they can change it at their discretion. So i'm going to challenge them on the proposed increase, i also might suggest that if they show me all the costs that they have outlayed that are specifically related to my property and we'll discuss an increase if these actually come to more than what i'm currently paying. I suspect that they wont want to share that info with me especially as the property is a flat with a separate maintenance charge for the building.

          Comment


            #6
            Are they a good agent in all other areas? If you would like to stay with them without the fees increase I would first try negotiating with them. They will not want to lose your business and if you go elsewhere you may get worse service & a fee increase too! As mentioned above, it seems likely that may agents may try to increase their fees to counteract their loss of income. If other landlords blindly accept the increase you may be able to get them to make an exception in your case and not impose the increase. If all their landlords protest & threaten to leave they may back down. However, before you carry out your threat to leave make sure you have identified a good alternative. Depending on your level of rent the 2% increase can be mitigated by a rent increase & is tax deductible so be sure what you are losing before you ditch your agent & find yourself with a worse deal.
            On the other hand if you are unhappy with their service this does give you an opportunity to change agents & I believe it would be very difficult for them to try to enforce the penalty.

            Comment


              #7
              I agree with what your saying, it would be silly to move just to get get a worse deal elsewhere and ultimately the agents will recoup their money somehow, if they cant raise it by increasing landlord fees then they'll increase introduction fees etc instead.

              As to whether they are a good agent? Its difficult to say, i've only ever used this company and its only been for about 18 months (2 sets of tenants). I had a couple of issues in the first year the worse one being that they tried to get me to pay for the kitchen floor to be screeded and vinyl laid to cover up what they claimed were tiles lifting. What had actually happened was the tenants had dropped something heavy on the tiles and broken them and this was a cover story to get them covered up and get me to pay for it. Since then i havnt had any issues, having said that, it is a modern flat and maintenance of the building is dealt with through the buildings management company so this might just be that there have been no issues to deal with. I havnt been in since the latest tenants have been in residence so I think my first move is to make an inspection on the property and determine if i'm worried about losing the tenants or not if i increase the rent, i'll then challenge the agent about the rate increase and my current agreement.

              Comment


                #8
                Why not suggest that you will agree with the new fee structure once they have agreed that the tenant's rent will be increased by the corresponding amount and they've started paying it.
                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


                  #9
                  I've had the same sort of fee increase proposed or imposed by three out of the four letting agents I use in Kent over the past couple of months.

                  I can't see anywhere in the terms of business agreement between me and the agents that permit them to impose a unilateral fee increase, so I've asked them to point out which clause allows them to increase the fees. So far I've just had holding replies - we'll see if they come back with a substantive reply.

                  Comment


                    #10
                    For a lot of agents the income stream from tenants was taken into consideration to offer competitive rates. I have heard the drop in income is is the region of 10-30% for the ave agency. 2% increase appears to be the popular figure of increase due the tenant fee ban. I guess if the agent explains the justification clearly and provides a good service a sensible landlord will either accept it or negotiate it down a bit.

                    https://www.arla.co.uk/news/november...-the-fees-ban/

                    Comment


                      #11
                      Originally posted by nukecad View Post
                      Is that a 2% increase on their existing 9% (ie. to 9.18% overall) - or an increase to 11% overall?

                      It's a big difference.

                      An increase to 11% would be a 22+% increase of their fee.
                      Everyone would like it if they could put their fees up by 22%.
                      But if they are just recovering the lost income there is no extra benefit to them.

                      I dont think tenant fees were so common 20+ years ago but as they became more the norm and increased, some agents saw it as a angle to offer silly (low) landlord fees to get new landlords which drove down management fees across the board. So without the tenant fee income we are now seeing landlord fees increasing back up to the 12%+ which was more common years ago,

                      However years ago landlords got tax relief on mortgage payments and didn't have the extra stamp duty to pay..

                      Comment


                        #12
                        As a firm we have simply notified landlords that things the tenant used to pay for such as references and check-outs will now need to be paid by them. It was never right to try to extract huge fees from tenants but unfortunately that is how some agents kept their fees to landlords so low. In my area we have seen three estate agents close this year as the low volume of sales takes its toll and I suspect we may lose a few more by the end of the year. The one thing that landlords and agents have in common is that neither are making money the way they used to!

                        Comment


                          #13
                          If the mechanism for changing terms isn't defined in the contract I'd suggest a month notice in writing by either party might be considered reasonable by a court. Equally it wouldn't be considered reasonable for them to increase your terms, but for you to have to pay a penalty to leave.

                          The fees ban is going to change the income stream of most agents quite significantly - especially those who have discounted to landlords but charged tenants through the nose to compensate. In my area this is mainly the corporates - Sequence and Countrywide. As a landlord I take the view that increased charges are inevitable but these 20% increases equate to £10 per month per property out of my pocket - and this can be passed on to the tenant at the next rental increase if so desired.

                          Comment


                            #14
                            Hello all, I have also received an email today from the estate agency regarding their 2% fee increase for my three properties. I will reply saying that I do not accept because it was not in the original contract that they could increase fees at their discretion.

                            My question is that if we cannot agree on this matter and end up parting ways, what would happen to the current three tenancies? Do the tenants have to move out if I find a new estate agent? Would I be penalised for breaking their tenancies early?

                            Therefore, do all estate agents have the upper hand as they know landlords cannot leave if we want to keep our current tenants?

                            Many thanks,
                            Katie

                            P.S I was already dissatisfied with this estate agent as there was a void period of three weeks when they were too slow to advertise a property when given two months' notice by the previous tenant and there was a new tenant waiting to move in.

                            Comment


                              #15
                              The tenancies would continue. It can only be terminated by a proper section 21 process. If you are the landlord, i.e. you are not in a rent to rent arrangement with the "agent", you will continue to be the landlord. Even if it were rent to rent, you would continue to be the "agent"'s landlord.

                              What you are likely to find is that there is a clause whereby you have to continue to pay the agent their commission on the rent, probably until the current tenant leaves.

                              Comment

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