Can an agent charge a landlord a fee for terminating their contract?

Yes – however there are some things to consider….

Contract (Agency Agreement/Client Agreement)

The contract between the landlord and the agent should clearly define how the landlord can terminate the contract and any charges that would apply.

If the landlord terminates the client agreement with a letting agent, the agent has a right to protect themselves, but what the agent charges the landlord must take into account what the agent is actually losing as a result. If the charges are excessive they will be deemed unfair and unenforceable even if they are defined in the agreement.

In J Spurling Ltd v Bradshaw, Denning LJ made the famous red hand comment:

the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.

If an agent is going to impose a significant financial penalty on a landlord for terminating a contract they should make it clear what that penalty is. If there were to be a dispute, the burden of proof that the agent made it clear in pointing it out to the landlord may rest with the agent.

Consumer Rights Act

Effective 1st October 2015, part 1 of schedule 2 of the Consumer Rights Act 2015 defines contract terms which may be regarded as unfair. Paragraph 5 states:

A term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied.

From this, a letting agent charging a landlord for services which have not been supplied such as property management during a continuing tenancy may be regarded as unfair.

Under the same Act, an agent must display a list of fees at the agent’s premises and on their website.

Guidance on this point states:

All fees, charges or penalties (however expressed) which are payable to the agent by a landlord or tenant in respect of letting agency work and property management work carried out by the agent in connection with an assured tenancy. This includes fees, charges or penalties in connection with an assured tenancy of a property or a property that is, has been or is proposed to be let under an assured tenancy.

If charges and penalties are not displayed as required by law, aside from the fact that the agent has broken the law, it may throw into question that the charges are enforceable on the grounds that the agent was not making the charges clear – they are attempting to hide them.

Further Reading

Consumer Rights Act 2015 Schedule 2

Consumer Rights Act 2015 Section 83

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