Here is a question to the blog clinic from Sue who is a landlord.

My managing agent contract comes to an end soon and I wish to terminate their services and manage the property myself.

I have been informed by the agent that under a clause in the contract, as they found the tenant for me I have to keep them as agents so long as I keep the tenant.

Can I terminate my contract at contract end date and let them send an eviction notice to my tenant but not let him leave. He is a great tenant but my agency charge too much for their services and I organise all work needed doing as they charge so much. I am doing their job basically

I would welcome your advice on this matter

Answer

In order to answer this question properly, we would need to know

• What exactly your agency agreement says about termination of the agreement
• If your agents have breached the terms of the agency agreement, and
• Whether you, the landlord, can be treated as a consumer landlord or a business landlord

So as we don’t have this information we can’t answer this question definitively.  Let’s look at the last item first.

Business or Consumer Landlord?

This is important because only if you can be treated as a consumer will the Unfair Terms rules (now part of the Consumer Rights Act 2015) apply to help you. 

Most landlords who own property in their own name and who are not ‘professional’ landlords, ie where the rent does not form their sole income and where property management is not their full-time occupation, will be treated as consumers – even if they own several properties.

However, if you own your property through a limited company, then you will inevitably be treated as a business and the consumer legislation will not apply.   Meaning it will be difficult for you to challenge the terms of your agency agreement.  

The definition of an ‘unfair term’ is one which:

contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer

An agreement that is open-ended and which it is impossible to terminate could fall within that definition.

There are also other consumer remedies that could help you – for example, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.  If your agency agreement was signed away from the agent’s premises or via the internet, the agents should have notified you of your right to cancel the contract within 14 days.

If this was not done, then you can cancel the contract (and look to recover fees paid under it) if the contract is cancelled within 14 days after you are finally notified of your rights.

Your Agency Agreement

Whenever there is a problem with a Letting Agent, landlords need to make their Agency agreement their first port of call.

First, check the clause which the agent refers to, which stipulates that you must keep the Agents so long as the original tenant resides in the property.  What does it actually say?  

The main case law on unfair terms in agency agreements is the Foxtons litigation from 2010 (we have a series of posts on this linked from here).  These probably won’t be directly relevant to you as they deal with renewal fees for a ‘find only’ agreement whereas it looks as if yours was a management contract.  However, they are worth considering – particularly if the clauses in your agreement were not explained to you properly and are buried in the ‘small print’ of the agreement.

Breaches made by the Letting Agent

If your Agents are not fulfilling their contractual obligations specified by the agreement, then, depending on the seriousness of the breaches, you may be entitled to terminate the contract on that basis – notwithstanding any contract term to the contrary. 

To be entitled to terminate an agreement, the breaches must be significant. For example, payments that are late by just a few days wouldn’t be considered a valid reason. However, if the Agent is consistently very late with rent or fails to fulfil important obligations such as carrying out inspections, then you may have grounds to terminate the agreement.

I suggest you go through your agency agreement and make a list of any breaches made by your agents.  You can then use this as discussed below. 

A Recent Case

There has been a recent case regarding a case very similar to this by the Property Ombudsman scheme. The details can be found here. It was held that a clause forbidding termination while a tenant was in situ, meaning that the landlord had to continue paying commission, was invalid and broke the code of conduct for the redress scheme.

Letting agents, by law have to be signed up to a Property Redress Scheme. Have a word with the redress scheme used by your agents, ask them about their Code of Practice.  They probably won’t be willing to express an option but it may be useful to take a look at the code.

What should the Landlord do?

Now the OFT no longer exist the main way that unfair clauses are challenged is in the Courts.  

However, most letting agents will not want to put their clauses to the test.  If their clauses are held to be invalid, this will affect their other landlords.  Then this sort of litigation will likely create bad PR and will put off potential landlord customers. Are these risks worth a few hundred pounds in management fees? I suspect not.

Before taking any hostile action, make sure that you have copies (or ideally the originals) of any paperwork such as tenancy agreements, certificates and the like.  As once you are in dispute with them, your agents may be reluctant to release them. 

If your tenants pay rent direct to the agents, you should also contact them and ask them to pay rent direct to youin future – as any rent held by the agents at the time you write terminating their agreement will almost certainly be withheld.

The tone of your letter will depend on the number and seriousness of any breaches by the agents of their agreement.  It sounds as if there may be numerous breaches in your case, in which case you can say that these breaches entitle you to end the agreement forthwith.  Set out details of the breaches in your letter (maybe in a separate schedule if there are a lot of them).

If the breaches are only minor then your letter should focus more on your status as a consumer landlord (assuming this is the case) and the fact that the termination clause they refer to is not binding on you as it is ‘unfair’ (assuming it is).  Offering to pay a modest termination fee may be a good idea here (or even send a cheque, making sure you say it is sent in full and final settlement).

Before doing anything though you should get some advice on your situation from a specialist landlord and tenant solicitor – for example, any of the panel solicitors for the Landlord Law Telephone Advice Service would be able to give good advice.

And finally

To answer your question directly, I don’t think threatening to evict your tenant when he has been a good tenant and you don’t want to evict him anyway is a good idea.  However, it sounds as if you should be able to terminate the contract based on the agent’s breaches of the contract terms.  Which is after all the real reason why you want to get rid of them.

But be sure to obtain legal advice before taking any action.

Note that on Landlord Law we have a special guide for landlords experiencing issues with their agents.