News

Lease Renewal Deposit Schemes - September 2009

I recently attended the London Landlord's Day at Olympia. This is my second visit and I always learn something as well as enjoying the day chatting to different companies about various aspects of lettings and the buy-to-let industry as a whole.

There was a good selection of seminar topics and I was particularly pleased to have the opportunity to attend the talk on Lease Renewal. I currently have a flat where the lease is now down to 73 years, and I and other leaseholders in the block, find ourselves needing to renew our leases, especially if we want to sell our properties, now or in the future, as it is virtually impossible for anyone to obtain a mortgage on a property with 75 years or less. Our freeholder is asking for £16,000 in order to renew the lease but I have no idea how that figure is arrived it and whether its 'fair'. Thanks to the information I gained from one of the Directors of ALEP, Association of Leasehold Enfranchisement Practitioners, and a surveyor and solicitor, also in attendance, I am now going ahead with an independent valuation for the benefit of all leaseholders in the block and an idea of how to proceed in the event that the freeholder's valuation figure differs wildly from my own. I would advise any buyer involved in a leasehold purchase to make sure he has adequate 'mileage' on the lease or that the sale price reflects the cost of lease renewal as clearly this is not an inexpensive cost. Also, you must have owned the property for at least two years before you can extend the lease, evidently the longer you wait to renew the more expensive the cost of renewal is going to be.

I hope to update you with the progress of my lease renewal in the future.

The other seminar topic on deposit schemes was also quite revealing. A director of UKALA, and a Letting Agent himself, addressed us on the 'minefield' that was occurring in the case of a dispute at the end of the tenancy. Generally speaking the Alternative Dispute Resolution Services that are there to assist in the event of a dispute are finding in favour of the tenant in nearly all cases, despite clear evidence and what would seem a clear cut case against the tenant. The reason being that unless all relevant paperwork is complete, i.e. every 'i' is dotted, and every 't' is crossed in the contract and inventory they are seemingly throwing the book at the Landlord. His advice was to avoid the services of the ADRS and negotiate with the tenant.
It highlighted to me the importance of keeping up good communication with tenants and indeed recording by email/letter any issues that are of concern during the tenancy.

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High Court Ruling on Renewal Fees - 10th July 2009

The long awaited decision from a three day court hearing in April has now been made. Mr Justice Mann accepted that all the terms the OFT brought before the court were unfair, including Foxtons' use of terms

Requiring a landlord to pay substantial sums in commission, where a tenant continues to occupy the property after the initial fixed period of the tenancy has expired - even if Foxtons plays no part in persuading the tenant to stay, and does not collect the rent or manage the property.
Requiring a landlord to pay commission to Foxtons even after it had sold the property.
Allowing Foxtons to receive a full estate agents' commission for sale of the property to a tenant.

In summary, however, the judge has not ruled against renewal commissions per se, but these fees must be flagged prominently, not just in the contract, but also in any sales literature and processes.

The Vice Chairman of the NLA, John Socha, commented "The NLA has been campaigning against these unfair fees for almost two years. This sends a direct message to letting agents that this lack of transparency must stop. Contracts must be clear with provisions which are upfront and 'plain and intelligible'

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Renewal Fees - July 09

The outcome of a recent court case between the Office of Fair Trading and Foxtons Estate Agents regarding ‘renewal fees’ is awaited. When a tenant renews their AST Agreement some agents are charging the original fee to the landlord, as if they’d sourced a new tenant. Prime Surrey Lets does not levy a renewal fee as stated in a recently pubished letter in the landlord journal, Landlord & Buy-to-Let Magazine, May/June 2009. This was in response to an article in the previous March/April edition where John Socha, Chairman of the National Landlord’s Association, called on Landlords to avoid using the services of agents who charge these ‘money for nothing fees’.

Renewal Fees should be scrapped - letter by Clare Price owner Prime Surrey Lets

Dear Sir

Regarding the recent Landlord & Buy to Let Magazine, and the article ‘Hidden Fees warning for London and South East’. I would like to inform you of my own local letting agency, www.primesurreylets.co.uk, which clearly states ‘no renewal fees’. I believe in a fair deal for landlords, especially as I am one myself, and wholeheartedly agree that these renewal fees should be scrapped.

There may be some justification for a small administrative fee if the landlord requests another contract to be drawn up, but in my experience, this can be avoided, as the original AST rolls on into a ‘statutory periodic tenancy’, which offers flexibility for landlord and tenant. There can be no justification for taking another large percentage off the rental money.

Clare Price
Director

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