Renewal Perpetual Agent Fee

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    Renewal Perpetual Agent Fee

    With regards to Competition & Market Authority guidance for Lettings Professionals on Consumer Protection Law/ chapter Renewal Commission and Sale Commission, I have few remarks to put to your attention, as followings:
    Article 4.23: "CMA considers the following terms, in particular, are likely to be found to be unfair....In addition, terms which require a landlord to pay ‘renewal commission’ to an agent: in circumstances where there is no further work after the introduction of the tenant, or where the landlord may decide not to continue instructing the agent in relation to any work, or.."
    Article 4.24: "Where an agent provides a tenant finding service only, and does not provide any ongoing property management or other services after the introduction of a tenant, we consider that it would be a surprising contractual term to require the landlord to pay commission for any events that take place after a tenant has been introduced"
    Article 4.26 is providing an excuse/ argument to the Agent to charge the Renewal/ Perpetual Fee.
    Art 4.29: "Additionally, a renewal commission term may be more likely to be fair if the agent’s entitlement to commission decreases over time and ceases within a reasonable period of time (unless it is demonstrably linked to the amount of work undertaken by the agent and that work does not diminish). If a renewal commission is payable only when you are instructed to carry out work, it is more likely to be considered fair."

    There are many reputable Agents which are charging Renewal/ Perpetual Fee with NO decrease of the Fee over time, Agents which totally ignore this guidance' chapter at least.

    I look forward to hear your opinion.

    #2
    "Surprising" does not mean illegal and until it is legislated against there will be plenty of agents who continue to charge these ongoing fees regardless of any further involvement with the tenancy. If they can get away with it, they will; but that's no different to any other business really.

    If a landlord wants a Tenant Introduction Service from me they pay a one-off fee at the beginning of the tenancy and they pay me again if they want me to find new tenants in the future. Most of them are also free to call me for advice or occasionally organise the odd thing without being sent an invoice because I value repeat business.

    I have very few customers who go elsewhere after having used my company.

    Comment


      #3
      The CMA document isn't law.
      A number of consumer legislation would apply to many landlords and their relationships with agents.
      Landlords are (collectively) not well known for applying a customer friendly approach to their tenants.

      Letting agents need to make money and there needs to be some way of striking a balance between that (farily basic) requirement and their making excessive amounts.
      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


        #4
        everyone who appoints an agent has an opportunity to read the terms before they do. If they agree to terms like this, that's up to them. If LLs refuse to deal with agents who include them, they'll stop doing it.

        Comment


          #5
          Many thanks for all your comments.

          This forum is great and is giving LLs an opportunity to scrutinize the law and the system.

          I have an response from TPOS, which I would like to share with the members, as following:

          "" Dear Sir

          Thank you for your email.

          You have asked us to comment on the Guidance provided by the Completion and Markets Authority – as a redress scheme, The Property Ombudsman will take into account this Guidance when coming to a decision, but we were not involved in formulating this Guidance.

          I can comment on TPO’s approach when asked to consider a case regarding renewal fees.

          Paragraph 5j of the TPO Code of Practice states that an agent must:

          - Actively flag any entitlement to renewal commission.

          - Make clear that a liability to pay commission will only arise where they are instructed to renew the tenancy or where the landlord has otherwise specifically agreed to their entitlement (i.e. in the contract),

          - The landlord should be reminded at the time of the renewal of the liability to pay a renewal fee (even if that liability is stated in the management agreement)

          We will also consider the case of the Office of Fair Trading (OFT) v. Foxtons (2009). This case was brought by the OFT under the Unfair Terms in Consumer Contract Regulations.

          This case was referring to let only contracts, where the agent finds the tenant, and the landlord then takes over the management of the property, but where the agent’s agreement with the landlord provides for them to continue to receive commission, by way of a renewal fee, whenever the tenancy is renewed. The Judge made it clear that he was not saying that clauses providing for commission on renewals were necessarily unfair in themselves. What he was saying was unfair was the failure of an agent to actively flag such terms. What is required is transparency, so the landlord is fully aware of, and understands the nature of, the contract he is entering into.

          In any case referred to TPO, we will look at what is fair and reasonable, taking into account both the Code provisions and the CMA Guidance. I would add that following dis-instruction TPO’s stance is that it is not fair and reasonable for a landlord to carry on paying fees indefinitely if they continue to let to a tenant introduced by the agent, and we would be looking to limit the renewal fee to around two renewals.

          I hope that this is useful.

          Kind regards

          Yours sincerely

          {mod - personal details removed}

          Comment

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