Renewal Fees
Most agents will be aware of the recent case where the Office of Fair Trading, now the Consumer and Markets Authority, took Foxtons to court on the issue of the fairness of renewal fees. It is important to note that the High Court, contrary to urban myth, did not make a ruling that all renewal fees are prima facie unfair. This is the argument often put forward by landlords where a dispute occurs over the payment of such fees.
Most agents will be aware of the recent case where the Office of Fair Trading, now the Consumer and Markets Authority, took Foxtons to court on the issue of the fairness of renewal fees. It is important to note that the High Court, contrary to urban myth, did not make a ruling that all renewal fees are prima facie unfair. This is the argument often put forward by landlords where a dispute occurs over the payment of such fees. In fact, in the above case one of the central points of defence put forward by the claimant landlord was that the Foxtons case which was quoted extensively in the above case. The judge ruled that the although the fact pattern of the case at Central London County Court was broadly similar because of the second signature of the landlord stating that she understood the terms this rendered the Foxtons issue irrelevant.
Of course, not all agencies charge renewal fees for signing a new agreement when the tenant remains beyond the fixed term. However, the above issue has a wider implication for all fees in a contract with the client landlord and emphasises that well-drawn up contract terms are not only enforceable but will be deemed to be so by the courts.
It is considered good practice for an agent to have a sliding scale of fees for renewal fees, if charged. For example, 10% for the first year, 7.5% for the second year, 5% for the third year and no further renewal fees. There are no hard and fast rules on this issue and many agencies still charge the full amount beyond the first year. It is really a matter for an individual commercial decision for specific agencies.