Contractual Tenancy Agreement early termination clause q.

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  • Contractual Tenancy Agreement early termination clause q.

    Hi, I am about to sign a contractual tenancy agreement for the rental of a property with Foxtons.
    As a former law student and knowing Foxtons reputation I am very carefully reading over the contract they have supplied before signing.
    I do however have a couple of questions:

    The lease would be for 36 months with a 24 month break clause - this is what F. is pushing for.
    My main concern is to make sure that should the unforeseeable happen in the next 3years and my partner and I need to terminate the agreement that we are not excessively penalised. At present the contract contains the following clause:

    19.2 Consequences of early termination of the Tenancy outside the Terms of the Tenancy Agreement...

    If the T vacates the Property prior to the end of the Term the T will remain liable to pay Rent until the Term expires or the Property is re-let, whichever is earlier.
    Should the Property be re-let during the fixed Term the T will also be responsible for the repayment of any pro-rata commission paid in advance by the LL for the unexpired portion of the Tenancy (where Foxtons are the letting agent this fee is calculated at 11% =VAT of the Rent for the fixed Term of the Tenancy) AND if the new Tenancy is for a lesser rent, an amount equal to the difference between the original Rent and new lower rental figure up to the end of the original Term.
    The T is also responsible for any other reasonable costs (eg telephone lines, satellite television contracts, TV licences, cleaning, admin fees ets) incurred from that point until the end of the Term. For the avoidance of doubt this clause shall not take effect where the T is operating a break clause contained in this agreement.

    This clause sounds fairly onerous and I wondered what the likelihood is that it could be considered excessive and in fact a penalty - which I believe a clause shouldn't be.

    However, the subsequent clause states:

    19.3 Either party shall have the right to terminate this agreement by giving the other party not less than two months' advance written Notice.


    Now, to my reading this appears to mean that despite the existence of 19.2 - (the onerous clause which deals with termination outside the terms of the agreement) 19.3 incorporates into the agreement the option to terminate the agreement, and thus the tenancy, by giving 2 months notice in writing, therefore avoiding the penalties of 19.2.

    Is my reading correct?

    Also if I try and negotiate the terms of the contract so that they are more evenly weighted can Foxtons refuse to negotiate point blank? My concern is that they may not bother contacting the LL and may just say 'sign this or lose the property'.

    Sorry for the long post and all help v gratefully received!

  • #2
    Originally posted by lauralillee View Post
    The lease would be for 36 months with a 24 month break clause - this is what F. is pushing for.
    My main concern is to make sure that should the unforeseeable happen in the next 3years and my partner and I need to terminate the agreement that we are not excessively penalised. At present the contract contains the following clause:

    19.2 Consequences of early termination of the Tenancy outside the Terms of the Tenancy Agreement...

    If the T vacates the Property prior to the end of the Term the T will remain liable to pay Rent until the Term expires or the Property is re-let, whichever is earlier.
    Should the Property be re-let during the fixed Term the T will also be responsible for the repayment of any pro-rata commission paid in advance by the LL for the unexpired portion of the Tenancy (where Foxtons are the letting agent this fee is calculated at 11% =VAT of the Rent for the fixed Term of the Tenancy) AND if the new Tenancy is for a lesser rent, an amount equal to the difference between the original Rent and new lower rental figure up to the end of the original Term.
    The T is also responsible for any other reasonable costs (eg telephone lines, satellite television contracts, TV licences, cleaning, admin fees ets) incurred from that point until the end of the Term. For the avoidance of doubt this clause shall not take effect where the T is operating a break clause contained in this agreement.

    This clause sounds fairly onerous and I wondered what the likelihood is that it could be considered excessive and in fact a penalty - which I believe a clause shouldn't be.
    It will be interesting to hear others' views, but in my experience this is not unusual, with the possible exception of the reference to "other reasonable costs". I don't quite understand what these would be, given that the agent's letting fee has already been apportioned.

    Originally posted by lauralillee View Post
    However, the subsequent clause states:

    19.3 Either party shall have the right to terminate this agreement by giving the other party not less than two months' advance written Notice.


    Now, to my reading this appears to mean that despite the existence of 19.2 - (the onerous clause which deals with termination outside the terms of the agreement) 19.3 incorporates into the agreement the option to terminate the agreement, and thus the tenancy, by giving 2 months notice in writing, therefore avoiding the penalties of 19.2.

    Is my reading correct?

    Also if I try and negotiate the terms of the contract so that they are more evenly weighted can Foxtons refuse to negotiate point blank? My concern is that they may not bother contacting the LL and may just say 'sign this or lose the property'.
    The agent can of course negotiate on the landlord's behalf within the confines of any authority delegated to them. Why not ask them whether they have consulted with the landlord?

    Your interpretation of the agreement seems to be logical, but I think it would be worth providing the whole agreement - or at least more detail on the relevant parts - in order to ensure that any advice you receive is properly informed.

    Comment


    • #3
      Onerous clauses...

      Thanks Preston for your thoughts.
      I'm still mulling over the contract and a lot of what is in it would seem to be going against the OFT's guidelines on consumer contracts - ie, placing excessive financial penalties on us as Ts etc. The emphasis of the contract is v clear as there are 17 sections dealing with the T's obligations and 1 with a few sub-sections dealing with the LL's.
      Bearing this in mind, I wonder whether it would be better not to rock the boat with regards to terms at this stage and, should we run into problems later down the line, rely on the fact that the contract is fairly unreasonable and thus the Ombudsman/courts would be likely to read it in our favour...

      Additionally there is a clause which says that we cannot run a business from the property.

      I am self employed as a consultant and wonder what would be a way of amending it to allow me to carry on working from home provided that I don't cause any damage to the property or problems for the LL....

      Given that this is a lease for 3 years, this seems unreasonable. I have no desire to cause any problems for the LL or any damage/nuisance at the house and am fully insured and don't foresee any problems.

      Any thoughts?

      Comment


      • #4
        Originally posted by lauralillee View Post
        Thanks Preston for your thoughts.
        I'm still mulling over the contract and a lot of what is in it would seem to be going against the OFT's guidelines on consumer contracts - ie, placing excessive financial penalties on us as Ts etc. The emphasis of the contract is v clear as there are 17 sections dealing with the T's obligations and 1 with a few sub-sections dealing with the LL's.
        Bearing this in mind, I wonder whether it would be better not to rock the boat with regards to terms at this stage and, should we run into problems later down the line, rely on the fact that the contract is fairly unreasonable and thus the Ombudsman/courts would be likely to read it in our favour...
        Many agents and landlords will not negotiate on the terms of their tenancy agreements, so I agree you may need to be pragmatic if you really want the property. But I wouldn't place too much reliance on being able to challenge unfair terms at a later date. As I am sure you are aware, at this very least this will be a good deal of hassle for you.

        Originally posted by lauralillee View Post
        Additionally there is a clause which says that we cannot run a business from the property.

        I am self employed as a consultant and wonder what would be a way of amending it to allow me to carry on working from home provided that I don't cause any damage to the property or problems for the LL....

        Given that this is a lease for 3 years, this seems unreasonable. I have no desire to cause any problems for the LL or any damage/nuisance at the house and am fully insured and don't foresee any problems.
        You raise a good point and one which is very common. Your choices are broadly:

        a) tell them the business you intend to run and ask for consent from the start
        b) ask for the agreement to be amended so that it excludes only certain types of business. Generally, this means activities which are likely to cause a nuisance or annoyance to neighbours or to invalidate insurance.
        c) ask for the running of a business to be prohibited except with permission, not to be unreasonably withheld.
        d) argue that your consultancy business is not run from home at all; this of course, will depend upon the facts of your particular circumstances.

        In your circumstances (a) would probably be the ideal way forward?

        Comment


        • #5
          First, the clause says that it does not operate if the right to break is exercised. It is very clear on the point. It is a moot point if it operates if there is a surrender, but that is not important so long as you remember that if you surrender the effect of the clause needs to be negated to avoid argument.

          In fact I do not think the clause works anyway. It is trying (like a lot of drafting one sees) to get round a very basic point of landlord and tenant law that cannot be got round. Faced with a tenant who owes rent a landlord has two choices:

          (a) to forfeit the tenancy

          (b) to maintain the tenancy and sue for the rent

          There is no halfway house between the two. Once you take back control to relet (and how can you relet if you do not take back control?) you forfeit the tenancy. Once you forfeit the tenancy all the terms of the tenancy fall by the wayside except to the extent that any breach occurs before the tenancy was forfeited. Clause 19.2 disappears in a puff of smoke since it deals with the situation after the tenancy has been forfeited.

          Comment


          • #6
            Break clause clarification

            Thanks lawcruncher
            Just to clarify, am I right in thinking that clause 19.3 will operate as a break clause at ANY POINT in the tenancy provided we (T) or LL give 2 months notice?

            Foxtons are speaking about a break clause at 24mths but my reading of the following clause is that you cease to be able to give the 2 mths notice AFTER 24 mths have passed rather than you can't give two months notice UNTIL 24mths:

            19.3
            Either party shall have the right to terminate this Agreement by giving the other party not less than two months' advance written Notice. This Notice can only expire after the first twenty four months of the Tenancy.


            Additionally I am curious as to whether clause 19.2 in effect would operate as a penalty since we'd have to pay Foxtons the commission the LL had paid, ie. financial recompense for an agreement made between parties other than ourselves...

            In general given common law tests of fairness and the OFT guidance on consumer contracts would clause 19.2 be likely to be held to be unenforceable (non-sensical!)

            Thanks!

            Comment


            • #7
              Foxtons have a reputation for taking any dispute arising from their interpretation of their contracts to the court of appeal. I can forsee any dispute arising from the above arguments costing someone a packet. I hope that it is Foxtons!

              P.P.
              Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

              Comment


              • #8
                You can give your notice at any time

                but

                it must expire after the first 24 months have elapsed.

                In other words, you are committed for 24 months.

                Comment


                • #9
                  Commercially, not legally, speaking, I would not agree to this clause.

                  It is totally disproportionate to the bargain.

                  If the property is relet presumably Foxtons keeps the original commission (hence the obligation for you to reimburse LL for it) and (assuming F acts as agent for the reletting) gets additional commission for the relet.

                  You should not be made responsible for the LL's bad bargaining of his agency agreement.

                  You will recall from your contract law that the wronged party has an obligation to mitigate his losses - this tries to reverse that position. This clause smacks of someone (LL or F - likely to be F given that the clause looks familiar and it is F who will make double commission) trying to profit from a breach.

                  Comment


                  • #10
                    Originally posted by Lawcruncher View Post
                    First, the clause says that it does not operate if the right to break is exercised. It is very clear on the point. It is a moot point if it operates if there is a surrender, but that is not important so long as you remember that if you surrender the effect of the clause needs to be negated to avoid argument.

                    In fact I do not think the clause works anyway. It is trying (like a lot of drafting one sees) to get round a very basic point of landlord and tenant law that cannot be got round. Faced with a tenant who owes rent a landlord has two choices:

                    (a) to forfeit the tenancy

                    (b) to maintain the tenancy and sue for the rent

                    There is no halfway house between the two. Once you take back control to relet (and how can you relet if you do not take back control?) you forfeit the tenancy. Once you forfeit the tenancy all the terms of the tenancy fall by the wayside except to the extent that any breach occurs before the tenancy was forfeited. Clause 19.2 disappears in a puff of smoke since it deals with the situation after the tenancy has been forfeited.
                    How about this for a thought.

                    The landlord is entitled to rent for the full remainder of the fixed period, provided the tenancy is not ended. The liabilities outlined in paragraph 19.2 could (and probably would in most circumstances) be less that the full rent for the remainder of the term. Could 19.2 be interpreted, therefore, as an agreement in advance on the terms of any potential surrender and if so, would it not be enforceable, at least to the extent that it does not exceed the original rental liability?

                    Comment


                    • #11
                      @lauralillee - As the contract is for three years and represents at least £75,000 in rent, I really think it would be worth paying a specialist solicitor a couple of hundred to check it over (especially as it's with Foxtons). I agree wholeheartedly with Preston that you should not rely on being able to successfully challenge 'unfair' terms.

                      The emphasis of the contract is v clear as there are 17 sections dealing with the T's obligations and 1 with a few sub-sections dealing with the LL's.
                      This much is not unusual as the landlord's side of the contract is primarily to give you the right to exclusive possession and do the statutory repairs.

                      Also note that, as from 1st October 2010, if your rent is less than £100,000 pa, the tenancy will become an assured shorthold tenancy. See
                      http://blog.painsmith.co.uk/2010/03/...der-published/

                      Comment


                      • #12
                        Thanks everyone for your help.
                        Unfortunately Foxtons will not negotiate on their 'standard' contract. It is being presented to us as 'sign or lose the property' -we don't want to walk away from the property as we are getting a good deal on the rent and are unlikely to find something similar at the same price, so I think we'll just have to sign and aim not to want to leave early! Luckily we can sublet if we obtain the LL's permission (which can't be reasonably withheld), so hopefully that would help should finances ever become an issue!
                        It is frustrating that F refuse to negotiate on their poorly drafted contracts - surely this in itself shouldn't be allowed. Any thoughts on this? I'm half inclined to drop a letter to the ombudsman saying I think it is unfair that all the power rests with the letting agents/LL and their policy is not to negotiate on contracts (we've been told point blank that they won't, trust me I spent 4 hours yesterday trying!) - yes people could walk away but this is not always practicable if they want somewhere to live!

                        Comment


                        • #13
                          In the absence of regulation, unless more tenants start to walk away agents like Foxtons will not change their terms.

                          Comment


                          • #14
                            Originally posted by Preston View Post
                            How about this for a thought.

                            The landlord is entitled to rent for the full remainder of the fixed period, provided the tenancy is not ended. The liabilities outlined in paragraph 19.2 could (and probably would in most circumstances) be less that the full rent for the remainder of the term. Could 19.2 be interpreted, therefore, as an agreement in advance on the terms of any potential surrender and if so, would it not be enforceable, at least to the extent that it does not exceed the original rental liability?
                            No. I do not think so.

                            Comment


                            • #15
                              Originally posted by Lawcruncher View Post
                              No. I do not think so.
                              Fair enough, but if this particular wording does not have that effect then it would certainly be open to the landlord to refuse a surrender unless the terms were agreed.

                              Comment

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