Property litigation update

Prominent letting agent agrees to waive tenancy renewal fees

In a recent case, Foxtons had entered into a letting agreement with a private landlord entitling them to a commission payment each year that the tenants stayed in the property. This payment was due to Foxtons even if they played no role in negotiating the tenancy renewal at the end of each year, and did not contain any provision for the landlord to withdraw.

However, in light of a 2009 High Court decision which found renewal commission clauses to be potentially unfair contract terms, Foxtons agreed for the landlord to withdraw from the contract. They were then free to negotiate a new tenancy agreement without having to pay any additional fees.

Severe penalties for landlords who do not protect deposits

The requirements for private landlords to protect tenant deposits are notably strict. Not only does the deposit need to be protected within 30 days of receipt, but a list of specific information, prescribed by The Housing (Tenancy Deposits) (Prescribed Information) Order 2007, must also be served on the tenants within this period.

Failure to meet either of these two requirements within the relevant timeframe will mean that the deposit has not been properly protected – even if it is later registered with one of the recognised schemes. The consequences of this are that the landlord will not be able to serve notice to evict their tenant – even if the tenancy agreement has expired – and will have to pay a penalty to the tenant of between 1 and 3 times the value of the deposit. This penalty is in addition to returning any deposit they still hold. The courts have not shown any sign of softening this approach so it is vital that landlords understand the procedures they must follow.

Residential landlords owed more than £800m in unpaid rent

In the UK, a third of residential landlords (around 500,000) say they have experienced rent arrears in the last year, according to research from The National Landlords Association (NLA). The NLA research shows that a typical landlord is owed £1,649 in outstanding rent. The total arrears across the UK amount to £850m.

It is important to spot potential arrears early and to put into place strategies to mitigate the impact. For landlords running a letting business, it is prudent to plan on the basis that they may only receive rent for 10 out of 12 months. This will allow sufficient margin for the majority of unexpected costs or a modest level of non-payment. As well as vetting prospective tenants thoroughly, it is always worth considering insisting upon a guarantor to cover any non-payment on behalf of the tenant. Best practice is to try to get a guarantor who is UK based and a home owner to give the best chance of enforcing the guarantor agreement. In a worst case scenario where the relationship with the tenant has broken down, it is likely that the landlord will be owed a significant amount of rent and court action is the only option to obtain possession and financial award to recoup some of the losses.

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