Updating post from Reddit.
Hi guys,
First time landlord here.
I’m considering accepting an offer through an agent on a fully managed basis for a tenant who initially wants a 3 year fixed term.
My understanding is that the 3 year term point is moot given they will be able to stay on a rolling basis after the reforms - which is fine by me.
My question is whether it is justified that the estate agent can keep claiming their letting fees for all these subsequent rolling renewals beyond the 3 year term they secured for me? To me it seems like I wouldn’t be able to seek new tenants or benefit from a “renewal rate” and I’d need to keep paying the same from the outset.
Am I being unfair on the agent here or should I be seeking a discount or insisting these fall away completely after 3 years?
I would advise them you’ll only sign the tenants up for an initial term of 12m, the fee would be off the back off the initial term and advise them there won’t be a renewal at the end of the fixed term, thus no renewal fee payable to the agent.
If the RRB is implemented within the next 12 months you would of paid an ridiculous intro fee for a 36m term for no reason, if it isn’t implemented but don’t renew the tenants, keep them on periodic until the RRB is implemented
Thanks for the advice - the fixed term includes mandated annual rent increases however - would those be tempting to secure alongside lower likelihood of void periods? I have also just now negotiated a lower renewal rate (2% less)after the 3 year period in case that makes the longer term more attractive?
I wouldn’t bother with renewals, they won’t exist as fixed terms are being abolished. You’ll be issuing rent increases via a S13 when the bill is implemented
Is the thinking that any pre negotiated increases would be legally unenforceable post bill and so there is no value in any long term paper stating this? Thanks so much for the advice
You’re confusing me now lol. What are you referring to pre negotiable rent increases for? You’re increases should be off the back of market rents at the time or a % above RPI two months before the increase is due. How are you planing to pre-negotiate increases three years prior?
They’ll be served via a section 13 notice where it can be contested via a tribunal. So best to use the agents to provide best price guides at the time of the increase to show the condition of the market at that time. There also a whole load of other changes with rent increases which I would suggest speaking to your agent or reading on the .gov website
The tenants have offered to pre agree contractually to 5% increases every year over the 3 years. I thought this was ok but maybe I’m being naive
Our % increase is 1.5 x RPI rate one month before the increase is due. I think if you pre agreed to 5% you are limiting yourself. That’s just me
Is it justified? Well - if it's in the contract and you sign it - then, yes.
Is it right/moral/reasonable - especially since the agent is not doing any additional work to earn this money beyond what they did to secure the tenancy? Well - most landlords would say no.
However, unfortunately, this is about to become the norm.
The upcoming Renters Rights bill will see tenants staying in properties for longer. This will reduce income earned by letting agents from 'renewals' and 're-letting'
As a way to earn back that lost income, I can see agents charging annual renewal & letting fees for as long as the tenants they found stay in the property.
Personally, I would recommend using a tenant find service to find the tenants. Then thereafter, use a property management company, who will simply charge a monthly fee for as long as you are with them. Or perhaps - a lettings agency that does both but does not charge those annual fees.
Thanks for the advice - the agent lose exclusivity today and so now is probably the time to seek some edits if necessary to the terms with them.
Yes, agents like to charge the same fee for as long as you rent to the tenant they found, regardless of how little work they do in subsequent years. It makes no sense to rational people and you absolutely should negotiate for a discount.
If I was to go with an agent (I have zero interest in using any of those jokers again) I would only accept a contract where the one-off tenant-finding fee was separate from the monthly management free.
Relatedly, you must also not accept any contract with silly penalty fees for termination (with fair notice) after some fixed period, not necessarily aligned to the tenancy agreement length. Termination fees are unfair (therefore not enforceable) and it's just easier to get that rubbish out of the agency agreement to start with. If you want to stop using their services, whilst keeping your tenants, that should be perfectly acceptable. If they want to retain your ongoing custom, they need to provide a good service.
Thanks a lot, fully agree with this afvuce