Ah yes the small print trap...it can give us quite a nasty shock when suddenly the print in the letting agent agreement terms is not-so-small, as I and plenty of other investors can no doubt testify.
In a parallel story, I have heard of several software license providers to slip in the odd strange agreement term or condition in their several pages of small print license agreement terms. For example, Tunnel Bear, the IP address geography shield that allows you to watch BBC iPlayer in Timbuktu, allows subscribers to pay them in honey instead of cash; although so far only one person - a beekeeper - has taken them up on their offer it seems! The reason is straightforward enough - pretty well nobody reads them, even less so on the Internet accompanying an immediate download.
Coming back to our world, I was recently presented with 'standard' letting agent agreement terms by a new lettings agency that I had appointed to take over one of my properties. The small print was not that small but nonetheless ran into several pages of A4. I had been given the 'we only charge landlords a flat fee of x% and a one-off set up fee of £y' line in dealing with said agent up until this point by which time they had been marketing my property for a little while and had several viewings lined up. I decided to give it a read, as tedious as that is but as history has taught me: I need to. Within the letting agent agreement terms, I discovered two clauses of notable concern:
The first was that if the tenant were to buy this property from me at any time during the agreement or within a year of me terminating my agreement with the agent, then I would be due to pay them a fee of 2% plus VAT on the sale...that's more than I typically pay an estate agent to market and sell a property in the first place!
The second, was that if I were to terminate the agency agreement with them but the tenant was to remain in situ in the property that I would be liable to pay them a complicated formula resulting in a fee for 'loss of profit' equivalent to 5 years’ worth of their usual fee...FIVE YEARS!!
I realise the value of the first point and merely agreed to reduce the fee to a more realistic 1%, amending and signing the same letting agent agreement terms by agreement. However, the second point was a bit trickier as the agent concerned was hiding behind the 'my insurers and legal team won't allow me to make any changes to this clause' excuse...but we just varied the sales agency fee right? In all honestly, this is probably what in legal circles would be classed as 'an unfair contract term' and especially so if the termination of the agency was due to a breach on the part of the agent. So, I took a view and accepted the same but not without an exchange of e-mails, which confirmed that the agent would most likely not impose this aspect of the letting agent agreement terms, in the event of a fault on their side that lead to the termination.
Maybe I should have just walked but there were not a lot of agents in this area and a previous one had also hit me with one of their own - property inspections are NOT included within a 'full management' letting agent agreement terms apparently - this is an extra at around £150 a pop if memory serves me correctly...ouch!! So, stick I did but they are pretty decent so far at least. I could tell of other stories with other agents here too.
The the small print in letting agent agreement terms can trap us sucker us in, as outlined in the referenced news article and also in a Just Landlords blog post. However, there is also the unwritten small print of letting agent agreement terms - so small that it is in fact INVISABLE. By this I mean, certain accepted standards or practices that some agents adopt but do not tell you. I have seen the £25 admin fee type for arranging a minor repair, which I usually take issue with when it arises in the agreement; but here I am talking about back door charges instead.
For example, asking a tradesman or contractor to quote one figure gross for me and then a commission or equivalent back to the agent to arrive at their net trade price. A 10% to 20% top slice, which is effectively paid for by the landlord but we never know it. Some agents will not work with a contractor unless they agree to do this...some but not all I add…
It is sometimes hard to spot the hidden charges buried in the small print of letting agent agreement terms but it is even harder to spot it when it is not even written down! All you can do in this instance is to ask them outright what their operating policy is and to sniff around on the forums to see if others are aware of it with said agent.
In my own case, after I smelt a bit of a rat with some repair quotes from one agent. So, I insisted on a quotation matrix to be put in place for any repairs, with three quotes to be obtained when the bill was above a certain level and for me to have the right to take over the selection of a tradesman / contractor where the bill exceeded a higher figure. I allowed low value quotes to proceed as is because I do get the point that getting three different quotes to fix a leaky tap might just be more time and trouble to the agent than it is worth. Aside from this, asking around in the trade’s space within the local lettings market can help to identify such practices and the culprits I have found.
Therefore, now I always read the small print in letting agent agreement terms and as a result I have ditched certain agents but also insurance providers and lenders. In other cases I have been able to spot a potential problem within the letting agent agreement terms and minimize its impact onto me before it arose by amending it. As for spotting those invisible small print points - that means doing a little more sleuthing but it can be worthwhile in the end.
I guess the moral of the story is: in order to avoid a nasty little surprise down the line then it is worth spending a little more time up front in reading the small print of letting agent agreement terms and asking a few key questions – it could just save us being bitten by the small print in the end.
Source & credits: The Telegraph