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High Court rules that agent fees should be more transparent. For the full story on this ruling and NLA comment, please click here.

Letting Agent Renewal Fees

What is this?

While many landlords choose to let and manage their properties themselves, using an agent is beneficial for some.  Agents can be employed to carry out a number of tasks depending on the individual landlords circumstances and that of the property in question. According to NLA research almost 60% of private residential landlords employ the services of a letting agent for some, or all, of their property portfolio.

Generally agents are employed in relation to one of three business models:

1. 'Let Only' or 'Introductory' Service – whereby the agent markets the property, finds and vets a tenant and provides a tenancy agreement. All subsequent management of the tenancy is undertaken directly by the landlord. The fee charged for this service is sometimes a one-off fixed fee, or more likely, a percentage of the annual rent – up to around 10%.
2. 'Letting and Rent Collection' – this involves the agent undertakings all of the actions listed above with the addition of rent collection. A landlord can generally expect to pay an extra 1-3% on top of the let only fee.
3. 'Full Management' - the agent acts as a full managing agent. They deal with all management issues, repairs, rent collection, starting the tenancy and some steps towards ending the tenancy. Fees for such service are generally in the region of 13-15% annual rent.

Whilst it can be relatively expensive, a good relationship with a reputable letting agent can be a very useful for even experienced landlords. An effective agent will take much of the Hassle out of letting residential property, help to avoid void periods and professionally vet applicants. All of which can be worth paying for, however when the initial tenancy agreement comes to an end many landlords are surprised to receive substantial bills for 'renewal fees' from their agent.

The NLA's position

In relation to fully managed tenancies there is little room for dispute, the letting agent will have handled, and continue to handle, all aspects of the landlord-tenant relationship and should be compensated appropriately for their work. Likewise when rent collection duties are undertaken by the agent there is a strong case for continued recompense.

In terms of a ‘let only’ agreement  a 'renewal' can refer simply to the agent contacting the tenant and negotiating a new fixed term contract and rent level, it could even refer only to the migration of the tenancy onto statutory periodic terms. Despite this many agents, particularly those in London and the South East of England, charge a full repeat commission for subsequent years.

There is little justification for a repeat fee equivalent to 100% of the initial commission which included marketing the property and referencing applicants. The NLA has campaigned against this practice, which we believe is unfair and should not be condoned or allowed to continue.  We therefore welcome the decision of the Office of Fair Trading to investigate the terms and conditions in letting agent contracts including provisions for unjust fees. 

We wish to see an end to excessive repeat commission charges. Where a renewal fee is appropriate it should simply reflect the actual work undertaken.

What we're doing

• Working with local authorities to help shape their local housing strategies.
• Lobbying Central Government, calling for greater consistency on licensing fees and conditions.
• Providing a unified voice for landlords in discussions with local authorities about licensing issues.

Read the NLA Bulletin for the latest news:
• Bulletin no.2 : April 2008 [ 250kb PDF file]
• Bulletin no.1 : December 2007 [ 195kb PDF file]

See also:
• NLA comment on Letting Agent renewal fees
• NLA Press release
• OFT's Reaction
• Full High Court Judgement