If you’ve used a high-street letting agent to find a tenant, you’ll probably have to pay a tenancy renewal fee if you renew the tenancy with your tenant after the fixed term expires (which is typically after 6 or 12 months).
But what exactly are you paying for, and is it actually worth it?
What is a Tenancy Renewal Fee?
Good question! No, really!
We’re told it’s an ‘admin fee’ letting agents charge to facilitate the renewal of a tenancy with your current tenants. All that really means is that we’re paying our letting agent to send a tenancy agreement contract – usually the exact same one as used before, but new dates and some times a new rent rate – to our tenants to sign.
From my experience, most letting agents charge landlords approximately 10% of the annual rental income! Some of the bigger agents charge more (I won’t mention names). A handsome sum for very little work, you say. You’re not wrong.
Tenancy Renewal Fees are a gigantic rip-off
I, and oh-so many other landlords, refuse to believe that paying 10% (of thereabouts) for every year that I keep a tenant is acceptable or fair. I understand that there is *some* admin work behind creating a new tenancy, but the prices we’re being charged is daylight robbery!
Letting Agents CANNOT charge Tenants a Tenancy Renewal Fee
Whether you realised it or not, many letting agents used to charge both landlord and tenant a tenancy renewal fee. Yup, they were screwing both ends of the stick. Or something like that.
For example, they would charge a landlord £200 to renew the tenancy, but they would also charge the tenant £200. Of course, many agents weren’t transparent about the double-ended shafting that was occurring.
What, agents being sly?!? Yup, I kid you not. The world is falling apart as we know it.
I speak in ‘past tense’, because since the 1st of June 2019, with the introduction of the “Tenant Fees Act 2019”, letting agents have been banned from charging tenants a tenancy renewal fee. An awesome result for tenants. Justice has been served.
However! As a result, letting agents can only charge landlords the tenancy renewal fee, so now the problem is that letting agents need to recoup their losses from somewhere; charging tenants a renewal fee was a very lucrative cashcow for agents.
You can see where this nightmare is going, can’t you?
Yup, many agents are now charging landlords the FULL whack of tenancy renewals, so renewing tenancies has become more expensive than ever before!
If you’re reading this blog post, the odds are you’re already having to deal with tenancy renewal fees, and you’re probably looking at how you can shake loose from the bear trap (don’t worry, I’ll cover that very shortly). But if by any chance it’s not too late for you – perhaps you’re just doing you’re due diligence and you haven’t chosen a letting agent yet – my advice is to avoid any letting agent that enforces renewal fees! Or, at the very least, ensure the renewal fee is a reasonable rate and that you thoroughly understand the mechanics of the clause.
How I avoided paying my Tenancy Renewal Fees
I’ve actually been in the situation where my letting agent wanted to charge me an astronomical renewal fee – it definitely felt like they were charging me for finding an entirely new tenant again, as opposed to photocopying a generic tenancy agreement and gathering a couple of signatures.
For the sake of protecting myself, I won’t name the letting agent involved, because my method of avoiding the fee wasn’t exactly “legit”, so I’m told.
A while back I used my local high-street letting agent to find me a tenant and fully-manage the tenancy. Eleven months later, the fixed term in the tenancy was due to expire, consequently the Tenancy needed to be renewed (i.e. a new contract with new dates needed to signed), unless I want the tenancy to become a Periodic Tenancy.
I wanted my tenant to renew so she was tied down for a set period, but at the same time I didn’t want the tenancy fully-managed by the agency anymore. I contacted my tenant and told her I wanted to manage the letting privately, without the use of a letting agent. She was fine with that because we had a good relationship, so cutting out the middleman made sense.
One month prior the expiration of the contract, my letting agent contacted me, and this was how the conversation went:
Agent: “hey, the tenancy agreement with your tenant is nearly up, would you like it renewed?”
Me: “Yes, but I’d like to handle it privately from now on”
Agent: “I’m sorry you can’t do that. Your tenant is our client, so if you want to go private you will have to find a new tenant”
Me: “What do you mean? I paid you XXXX amount to find me a tenant, and you did. Thank you, but I can take it from here”
Agent: “Ok, but you’re not allowed to do that. You can keep our client if we set the new contract up for you”
Me: “How much will that cost?”
Me: “What? £400, just to set up a contract? I can download one from the internet for free”
Agent: “haha, no you can’t sir”
Me: “I assure you, I can. If not, I can just photocopy the existing Tenancy Agreement and reuse it. It seems as though you just want money out of me for nothing. This is ridiculous”
We argued for about 30mins, going around in circles aimlessly. By the end of the conversation we were both pretty pissed off. I eventually made it clear that there was no way in hell I was going to give them another penny for doing no extra work, especially after our conversation. At the end up it, she threatened me with legal action. I knew there was no way she was going to bother going down that road (I called her bluff). In conclusion, I kept my tenant, avoided all fees, and didn’t hear from the agent again.
In retrospect, calling her bluff and refusing to pay the renewal fee probably wasn’t the best way to handle the situation. I’m still not sure how far she could have legally taken it, I’m just glad there were no repercussions. However, there are better ways to avoid renewal fees.
Just to clarify, while I was having the conversation with the letting agent, I wasn’t sure whether there was any mention of a tenancy renewal fee in the contract I signed with them or not. But it was the first I had heard of it, so I just assumed I never agreed to any such thing.
How to avoid Tenancy Renewal fees
Method 1: Use an online letting agent
As said earlier, it might be too late for this, because the presumption is that if you’re reading this blog post, you’re already on the verge of being shafted with a renewal fee. But for future reference, you may want to take a look at using online letting agents to source your tenants.
Notice that I’ve referred to the letting agents that charge a renewal fee as “High-street letting agents”, and that’s because ‘Online Letting Agents’ (which are distinctively different than high-street agents) typically don’t charge additional fees beyond a fixed “tenant-find” fee. That’s just one of the reasons why they’re freaking awesome.
Method 2: Ask your letting agent whether they charge Tenancy Renewal Fees
Not ALL high-street letting agents charge a tenancy renewal fee. So rest assured, even in this snake filled industry, there are still a few good men/women standing.
Before agreeing to use the service of a letting agent, ensure to enquire whether the agent charges the fee or not. If they do, find out how much, and whether they’re willing to waiver the fee. Depending on how business is, they may be prepared to drop the fee. I would get it in writing though :)
Method 3: Allow the tenancy to roll onto a Periodic Tenancy
The tenancy renewal fee is usually only chargeable if the tenancy is “renewed” i.e. new contracts are signed, and the tenant is tied in for a new fixed term. However, if you don’t sign new contracts, the tenancy becomes what is known as a Periodic Tenancy Agreement. If you allow this to happen, most agents can’t charge you a “Tenancy renewal Fee”
With a Periodic Tenancy, the same terms and conditions apply to what’s stipulated in the existing Tenancy Agreement, but the contract becomes “periodic”, which is dependent on how often the rent is paid. For example, if the rent is paid monthly under the original fixed term, this will become a monthly periodic tenancy, or a weekly periodic tenancy if that’s the payment schedule.
So, if the agent tries to charge you with a tenancy renewal fee, just say, you’d like the tenancy to roll onto a periodic tenancy. That may avoid the fee, depending on what is written in the contract you signed with the letting agent.
Method 4: Is the Tenancy Renewal Fee clearly stated in the contract?
When using a letting agent, you’re usually required to sign a contract with them. In the contract, there should be a clause which refers to a renewal fee if it’s part of their policy.
However, if the tenancy renewal fee is NOT in the contract, or clearly stated in the contract, then there’s a good chance you won’t be liable to pay. There was case that went to court a few years ago, which involved Foxtons Letting Agents. The judge ruled that because the fee wasn’t stated clearly in the contract, it wasn’t enforceable. You can read more about that case here, High Court rules against Foxtons.
Method 5: Talk to your tenant
I wouldn’t advise following the rules of method 4, because I’m not sure how legal/illegal it is, or what the implications would be you got caught doing it, but I’ve heard of other landlords doing it :)
If your letting agent is adamant on extracting the renewal fee from out of your pocket, then you could simply tell the agent that you no longer want to renew the contract with the tenant(s). Simultaneously, make arrangements with the tenant to go along with the story, and tell them to in form the agency that they would no longer require rented accommodation.
At this point, landlord and tenant can continue with the arrangement they’ve always had. And if they wish to rearrange a new Tenancy Agreement between them, they can do so.
Disclaimer: I'm just a simple landlord blogger; I'm not qualified to give legal or financial advice. Any information I share is my opinion based on my personal experiences as an active landlord, and should never be contrued as legal or professional advice. For more information, please read my full disclaimer.