Letting Agent sold/taken over - am I free to terminate contract with agent?

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    Letting Agent sold/taken over - am I free to terminate contract with agent?

    I am a Landlord of a cottage that is managed by a letting agent who manage the tenancy and collect the rent etc.

    The agency that I originally engaged to carry out this work for me has sold their business to another existing local agent.

    The contract that I signed was with the original agent and I have not signed a Management Agreement with the new company. For the past 6 months or so the new agency has been managing the tenancy without issues and in exactly the same fashion as the original company.

    I am however now considering managing the tenancy myself - so I would like to serve the 3 months notice to end the Management Agreement.

    The agreement that I signed with the original agent requires me to pay a "placement fee" in event of my terminating the agreement. - It says in my Management Agreement:
    "A placement fee equivalent to one month's full rental will be payable to (name of original agent) upon termination . . ."


    So my question is - would I have to pay this placement fee to the new agent. Points to note:
    • A. I have not signed an agreement with this new agent - my tenancy was simply handed over to them and I have never consented to the change of management.
    • B. I have, however accepted their good service for over 6 months.
    • C. The new agents did not find the tenants anyway.

    Effectively I'm asking if the original Management Agreement applies to the new agent?

    Any thoughts on this most gratefully received . . .

    #2
    If the business being sold (A) was simply acquired by a new company (B) your contract with A is probably still in place unless it says that it would end on a change of ownership.

    If the sale was simply the contracts and other goodwill, it's possible that your agreement has been novated or assigned to B as part of that process.
    That may or may not require your consent, depending partially on the wording of the agreement, but your continued trading may have been implicit consent.

    In both cases, the terms of the agreement should be the same including the termination clause.

    To be honest, that's not a bad termination fee for a letting agent and it might actually suit you to be bound by that agreement.
    The new agencies termination fee might be much worse!

    Don't forget that you'll need their cooperation with all of the tenancy documentation and any deposit - if you are forced to repossess they will have the information you need to move that forward.
    Or they'll bin 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


      #3
      Thanks for your swift reply.
      That all sounds pretty logical to me. (Although novation is a new word to me.)
      It seems to me that it would be fair if, at the time I was notified of the change over, I wanted to object and interview a new agent for myself. But having accepted their good work for 6 months, it does feel like I have accepted their work on the same terms as agreed in the original contract.

      Thanks very much for your input.

      Comment


        #4
        I have a similar problem. I have two flats in London, which I let out with an agent on a tenant finder basis, and agreed a favourable percentage rate, which would reduce each time the tenants renewed. The agency was taken over by a large chain and we were informed by email that nothing would change. Our tenants are now coming to the end of their contracts and the new agency says we are not entitled to any reduction as they have no record of what was agreed with the original agents. They say if we are unhappy with this deal our only option is to give our tenants notice.
        (We have had a problem regarding contract already as they inspected the flats without informing us, because they thought they had a full management contract with us. I am now doubtful of what records were actually passed on by the original small independent agency)

        Comment


          #5
          [QUOTE=1gvlandlord;n1092346(Although novation is a new word to me.)[/QUOTE]
          It's a legal thing, and it's common when buying and selling a business and not so common anywhere else.
          When a contract is assigned, the original agreement is (essentially) still in place, but some of the rights of the contract are transferred to someone else, but the obligations stay with the original party making the assignment and the other parties don't usually have to agree.

          Novation means that one of the parties to the contract changes, the new party accepts all of the rights and obligations of the previous party. The agreement of the other parties to the contract is required.

          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


            #6
            Originally posted by Grannie WIse View Post
            I have a similar problem. I have two flats in London, which I let out with an agent on a tenant finder basis, and agreed a favourable percentage rate, which would reduce each time the tenants renewed. The agency was taken over by a large chain and we were informed by email that nothing would change. Our tenants are now coming to the end of their contracts and the new agency says we are not entitled to any reduction as they have no record of what was agreed with the original agents. They say if we are unhappy with this deal our only option is to give our tenants notice.
            Do you have any record of the agreement with the previous agent or some evidence that a reduction has happened previously?

            Unless there's some way of ending the agreement with the agent without ending a tenancy, it's unlikely that would be enforceable which is probably a defect in the original contract, mitigated by the reduced fees.
            Without the reduced fees as mitigation, it's probably difficult to enforce.
            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


              #7
              I agree with jpkeates that the circumstances are such that, whatever the contract may say about assignment, the OP has impliedly accepted an assigment of the contract to the new agent and that the terms of the contract have not changed.

              I do not though think I can agree that one month's rent is "not a bad termination fee for a letting agent". I think it is excessive in any case and certainly when three months' notice also has to be given. I think it has to be covered by paragraph 5 of schedule 2 of the Consumer Rights Act 2015 (Consumer contract terms which may be regarded as unfair):

              A term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied.

              Comment


                #8
                Originally posted by Lawcruncher View Post
                I do not though think I can agree that one month's rent is "not a bad termination fee for a letting agent".
                I think I may be shell shocked by the fees I have seen in other cases.
                You're probably right.

                Based on an agents "typical" 15% management fee, a month's rent is about six and a half months fee income.
                Which didn't seem too bad - but I'd overlooked the 3 month notice as well.

                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
                  Before considering leaving seize the opportunity with the new agents that has taken over the book to inspect the documentation they have received to ensure that everything has been transferred and is in order.
                  Use this opporunitity to get a copy for your own records.

                  This advice stands even if you are not planning on leaving.. you dont want to discover a year or two down the road that vital documents/information was not passed over.

                  Comment


                    #10
                    Thank you for that contribution sam-cat, good plan.

                    As it happens I think that, with the termination placement fee in place, it may not be worth terminating the arrangement.

                    Although; here's a detail to exercise any keen minds out there:

                    In the original (and only) Management Agreement:
                    • On page 2, under Scale of fees, we negotiated a reduction in the "Letting Only Service Fee: (Items 1 to 6)"
                    - which reads: "Our normal Tenant Find Fee equates to one month's gross rental plus vat but a fee of £450+vat has been agreed for this client"
                    ​​​​​​But​:
                    • On page 6, under TERMINATION it states that "A placement fee equivalent to one month's full rental will be payable to (name of original agent) upon termination . . ."

                    So you will see - now that I have accepted in my little head that the Management Agreement is relevant to my new agent, I have to decide whether I consider the "Normal Tenant Find Fee" on page 2, or the "placement fee" on page 6 to be a fair fee to be payable upon the event of my serving notice to end the arrangement.

                    How does it look to those of you willing to give it your considerations?

                    Thanks . . .

                    Comment


                      #11
                      That's stretching it.
                      Where a fee has been varied, it's been recorded as a variation, and the placement fee has no indication that it is to be varied just because another fee has been varied.
                      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


                        #12
                        Out of curiosity though, isn't a placement fee the same as a find fee?
                        In my Management Agreement the Tenant Find Fee includes advertising and marketing, interviewing, taking up references, preparing tenancy agreement, liaising with mortgagees, and taking a deposit - isn't that what a placement fee is? Aren't they the same thing?

                        But I guess for the agreed discount to also apply in the case of termination:
                        • either the discount would need to be set out specifically in the clause referring to termination (i.e. as the discount isn't mentioned in the termination clause, it doesn't apply in the case of termination).
                        • or the termination clause would only use the term "placement fee" - without going on to specify "equivalent to one month's full rental"

                        It's all in the detail.

                        Comment

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