How to break up with your letting agent: Understanding termination clauses, rights and fees for landlords

Most landlords aren’t asking for much. They want a professional service, from competent people, for a reasonable price. Delivering what’s promised is the least a person should expect from any service they pay for – so why are so many landlords being let down by their agents?

The average UK tenancy is just over four years. This is a long time – and could be even longer if you have a good tenant in place – so choosing the right agent is very important.

Have you felt frustrated with your letting agency recently? Or heard a friend of yours moaning about their agent? When you think about it, how often do you hear anyone say good things about a letting or estate agent? Not often.

Perhaps you feel like you can rarely get hold of anyone. Maybe the agency never updates you or knows what’s happening. Or you’re not even sure what you’re actually paying for. You’re not alone.

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Signed, sealed…undelivered

Many landlords I speak with every day are fed up with their agents. They’re tired of talking to answer phones, being left in the dark, and having to deal with people who “ain’t got a bloody clue” (landlord’s words, not mine) all whilst being charged an arm and leg.

Of course, not all agents are like this. There are some fantastic agencies out there, but if they’re not providing the service they initially sold to you – it’s time to look elsewhere.

You may be thinking “That’s easy to say but I can’t leave until my contract is finished” – or maybe your agency terms are so complicated you wouldn’t even know where to begin.

‘Breaking up’ with your agency may seem difficult because the endless pages of terms are a garbled jungle of jargon, but the key is fully understanding your legal position and your rights – so you know what options are available to you.

Breaking up with your agent

I know it might be tempting to screw your terms of business into a ball and let your dog play with them until they are a shredded, slobbery mess. Then you can simply tell your agent “my dog has eaten the terms”, freeing you from your contract. Unfortunately, this won’t work, and is clearly not the best way to deal with a contract or service dispute.

A far better approach is to look through your terms and find the termination or cancellation contract clause.

There can be multiple elements of the contract that require different notices, and these can differ if you’re serving notice for the ‘fully managed’ or ‘introduction/let only’ part of the contract. Legal wording can make this seem complicated, so take your time and ensure you understand what you’ve agreed to.

You may find something along the lines of:

Our appointment will continue until the end of the fixed-term Tenancy Agreement

This is a simple one and means you’re bound to pay the letting agency until the initial fixed term AST expires, which is usually six or twelve months. To terminate your contract, you must give the agency the required notice, which will be outlined in the terms too.

Regarding ending your contract early, you may find something like:

If, after the 14-day cancellation period has expired, you let us know that you want to end the contract, and this is before we have received a sum equivalent to £X in fees, we will charge you £X.

This is another easy-to-understand clause, and it’s written in layman’s terms. It just means you need to pay a certain amount of money to your agency if you wish to end their service.

Another similar one is:

If, after the 14-day cancellation period has expired, you let us know that you want to end the contract, and this is before we have received a sum equivalent to four months’ rent + VAT in fees, we will charge you two months’ rent + VAT.

In this instance, if your rent is £1,000, you’ll need to have paid £4,800 in fees before you can leave without paying anything else. If not, you still owe 2 months’ rent + VAT.

So, if your letting fee is 10% + VAT (12%), you’ll be paying £120 monthly. It would take 40 months / 3.3 years before you have paid equivalent to £4,800 in letting fees and therefore before you can serve notice without having to pay any further fees.

At first I was afraid (but mostly confused)

Unfortunately, not all terms are as simple and easy to understand. Many landlords are stuck with their agents for years because the terms are so misleading or haven’t been explained properly.

Here’s another example if you’re getting a fully managed service with your agency:

Either party may end this agreement by serving not less than 3 months’ written notice on the other, provided that such notice does not expire less than 6 months after commencement of the Services.

The agency has outlined that after three months, you can serve three months’ notice, so there is a full six months of service. Simple, right? Not quite.

The terms then say:

For the avoidance of doubt, in the event that you terminate the management services under this clause, you shall still be liable to pay Fees in respect of lettings services in accordance with these Terms.

If you wanted to end your contract in this circumstance, you’d have to look through the terms to find out what “lettings services” you have agreed to. A lot of landlords I speak to are actually unsure what service they’re paying for – especially if they’ve been with their agency for several years.

In some instances, although the landlord has been paying a ‘management fee’ of X% each month, if they want to leave, they’re now liable to pay an additional percentage ‘letting service’ – this could refer to the introduction or tenant find service at the start of the tenancy. In this case, it was equivalent to 13.2% of the annual rent.

Find out how much you could save in lettings fees with our free Lettings Calculator.

My tenancy will go on…and on

You must also ensure you won’t be liable for further costs should the tenant renew the term.

The clause could look something like this:

In the event that the tenant renews, extends, or enters into a new agreement for which rental income is received, a renewal commission of X% of the rent received becomes payable. You will not be liable for Renewal Commissions relating to any period beyond the end of the second year from the expiry of the Initial Agreement.

You should also look out for clauses when your service is ‘introduction only’, also known as a ‘find a tenant’ – meaning the agent doesn’t manage the property or collect the rent. Some terms require a renewal fee every year, even if the agent isn’t managing the property – so watch out for this.

Here’s an example:

The tenancy management service and the fees payable continue for the tenants we have introduced throughout the entire original period of the tenancy agreement and any renewal of it or for its extension by any form of periodic tenancy (this, therefore, includes but is not limited to any period when tenant we have introduced remains in the property).

In this example, it’s made clear that the only way you’re ending your contract, or moving letting agency, is by saying goodbye to your tenants.

If you have really good tenants, the last thing you’ll want to do is ask them to leave. Even if you’re frustrated with the agency’s lack of responsiveness or sneaky hidden costs – a good tenant who pays their rent on time and respects your property may outweigh your frustrations.

Should I stay or should I go now?

Sometimes, the cancellation terms and notice periods are vague or not included in the terms at all.  It may say, “if you wish to serve notice, please email the letting agency” to which you could be met with a whopping fee, conveniently omitted from your contract.

Luckily for you, any ambiguity in a contract goes in favour of the person who did not write it. As such, you can challenge it.

When you’re faced with some of these extortionate termination fees, you may think ‘is it even worth changing agencies?’ If this is the case, start by weighing-up the pros and cons.

If the agency has not breached the contract in any way, and you’re just looking to increase your revenue, it might be worth calculating your costs over the next two years. If you stand to save a substantial amount, even after paying the terminations costs (high rental value and a management fee of 12% + VAT (14.4%) of the rent, for example), it might make financial sense for you to switch now.

Always double-check what you’re getting for your money with the next agency and take note of the features included within their plan – every agency is different. Negotiate. If it’s purely down to the fee, and the agency you’re with is professional, responsive, transfers the rent in a timely manner, and you’re impressed with their service, you could look at negotiating the fee with them instead of moving away. The grass may not always be greener, so give it a try.

Already torn, but not quite out of faith

Now let’s say you are irritated with your agency because they don’t seem to care about your property, never do what they say they will or haven’t delivered on what was promised.

This is more serious than just trying to save money. Fortunately, contracts are legally-binding agreements, so when either party fails to meet their obligations, the contract can come to an end. There are different breaches to understand and different consequences too.

Material breach

A material breach occurs when one party receives significantly less benefit or a significantly different result than what was specified in a contract. Material breaches can include a failure to perform the obligations laid out within a contract or a failure to perform contracted obligations on time.

You should look to retain evidence if this is the route you wish to take.

Breach of service

A breach of service is like the contract stating two mid-term inspections a year will happen, but you only get one – or none at all. You need to give notice of the breach and they would normally have 30 days to rectify it (depending on the terms of the contract). If nothing changes, then you can serve notice of a material breach.

The courts have ruled that a series of minor breaches of a contract could constitute a material breach. An agency has a duty of care and should always be delivering what they promise in the agreement. You agree to pay the fees every month, and they agree to deliver a service. Simple.

You may find that you have quite a few ‘smaller issues’ going on, but nothing that mounts to a material breach. In this instance, you should complain to the agency and detail exactly what the issues are. You could say: “I have been contracted with you for X time, and I can count X amount of service issues. This now breaches your duty of care and contractual duties.”

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Sorry seems to be the hardest word

Sometimes you may feel that the agency has breached the contract, and they disagree. They may say you’re bound to their termination fee, and you want to dispute it. The good news is you can.

Firstly, check if your agency is a member of The Property Ombudsman. If so, there is a strict code of conduct they should be following, and if they’re not, you can make a complaint. Sometimes, just raising this to the agency will ring alarm bells, and the agency may start to open up negotiations with you instead of letting it get to complaint level. Or they could start performing better. It’s a win win.

Some landlords want to cut and run if the agency doesn’t agree with them. If this happens, you might end up at the small claims court, which really isn’t as scary as it sounds. You will build a case against the agency, and the agency will build a case against you. You’ll pay a fee between £45 – £200 (not recoverable, even if you win) and you’ll sit in front of a judge who will decide if you’re liable to pay or if the letting agency is in the wrong. For more information about small claims court, please click here.

Some landlords are nervous they will have a CCJ if they are taken to small claims court.  But this would only be the case if the judge finds in favour of the agency, orders that you pay what is owed, and then you fail to comply with that Court Order. If you lose but pay what the court orders within one month of the judgement, then a CCJ will not be registered against you. However, if you lose the case, you may be ordered to pay the court fees incurred by the claimant.

Most letting agencies won’t have the time or inclination to take you to court, so they may just chase you a couple of times then you’re in the clear. It’s also bad business to spend too much time and energy on one property or landlord, especially when they want to leave due to bad management. The agency will typically want to minimise damage and avoid official complaints, poor reviews, or negative public comments. I’ve seen agencies get threatened with bad reviews, due to lack of care, and allow landlords to break free from their agreement.

However, be careful as they may also want to make an example of you. For the avoidance of doubt, if you choose to serve notice and end the contract, you could be in breach of contract – consequences.

Time to say goodbye

My biggest suggestion is always to read your terms of business before signing them. This blog is not legal advice and is simply our shared experience and guidance. 

If you’re unsure of your position or are struggling to understand your terms of business, we would recommend you speak to a specialist solicitor. They can review your contract and clauses, determine if your agency is in breach of contract, discuss options with you, and help you to serve notice. We would recommend Stephensons Solicitors LLP, who can be contacted on 0333 999 7155 or by emailing [email protected]. More details of their services can be found here.

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