By Polly Botsford, legal journalist.
An ‘introduction fee’ or commission is often charged by estate agents and letting agents who find a tenant for a private landlord. In the past, some agents have also charged what is known as rent renewal commission. That is, they continued to charge a commission for all the subsequent years that the tenant was paying rent in the property — and that commission was as much as 11% of the annual rent.
The Foxtons case
A few years ago in a case between Foxtons and the Office of Fair Trading, the OFT found that although introduction fees are fair, the rent renewal commission can be unfair and therefore illegal and so most agents have stopped charging it.
But it has also recently been decided that landlords who paid out thousands of pounds of commission in the past can even claim that commission back. Ronnie Hutcheon, director of Hutcheon Solicitors, the only firm to bring successful claims for past rent renewal fees, says: “We have had three wins out of three court cases and many more successful settlements in favour of landlords who have been unfairly charged commission in the past. We are currently representing someone who paid around £40,000 in renewal fees.”
– If you currently rent out a property and have been charged a rent renewal fee or commission: this is likely to be unfair and you could refuse to pay it on the basis that it breaches consumer protection regulations.
– If you currently rent out a property and have been charged a rent renewal fee or commission in the past six years: you could claim it back.
How do I do claim back this commission?
First, you need to make sure that your situation fits the law.
– You must be a private landlord with one or two properties, not a developer/landlord with a large portfolio, as the protection is only available if you are acting as a ‘consumer’ not a business.
– You can only claim back six years from the time you make the claim even if you paid the renewal fee for longer than that. So if you paid renewal fees from 2003 to 2010 and you make a claim now, in 2011, you can only claim back to 2005 and you will lose the commission for the years 2003 and 2004.
– You may not be able to claim if the letting agent told you very specifically about the rent renewal fee at the time they introduced the tenant to you.
– You need to bring a claim in the English courts. If you paid out under £5,000 in renewal fees, then your claim will go onto the small claims track at the court. Small claims are much simpler and you do not need a lawyer to bring a claim. If you have a small claim, there may be a mediation service to use. Also, the Citizens Advice Bureau can help you with the small claims process. The CAB is often busy, however, so also look on their website for guidance on small claims.
– If you paid £5,000 or over, you may need to see a lawyer to help with your claim. If you do, ask if they will represent you on a no-win no-fee basis.
– You could also be awarded interest on the amount which you have already paid out.
POLLY’S TIP: Before you make a claim, if you write to the letting agency telling them that you are considering making a claim because you believe they owe you commission which is against consumer protection regulations, you may be able to resolve the issue without the need to go to court.
There is a dedicated website for landlords with possible claims: rentmanagement.co.uk
Polly Botsford is a legal and current affairs journalist who can be contacted at firstname.lastname@example.org. She is also a practising employment lawyer under her married name, Polly Jeanneret, at Halebury law firm.
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