Are you being ripped off by a letting agency?

A few years ago, I had an empty property that I needed to let to cover the mortgage, so I place an advert in my local paper and the response was pretty poor. Actually, the only person to call me about the property was an estate agent in my area. (Let's call him MA). He told me he could have my property filled within two weeks of our phone call. Sounded great! I left it with him and didn't bother advertising it anymore. Sure enough, I was getting calls from him almost straight away, asking if I could show prospective tenants around the house. MA never went around himself and never sent any of his staff around. In fact, he never even saw the house; he just left it to me to show everyone around. Admittedly, it was something I didn't mind doing, but it'll soon become clear why I have a bit of a gripe about it now.

Within two weeks I had a good tenant in the house and everyone was happy. MA asked for 10% plus VAT, of the yearly income on the property, for finding the tenant, which I was happy to pay. I chose not to take him up on his offer to manage the property as I was quite capable of doing that myself. Contracts were signed, monies changed hands and that was that. Well, until a year later when the tenant was due to move out. I got a letter from MA reminding me that the contract was up and would need to be renewed. The tenant had decided to stay, so new contracts were issued (in fact, they were simple templates which were amended and sent out) papers were signed and MA asked for 8% of the yearly income on the property. A 'finder's fee' again, I was told, but 8% plus VAT? What choice did I have? So monies changed hands and that was that.

Until the following year when I received another letter from MA saying contracts had to be renewed and he wanted a further 8% plus VAT 'finder's fee'! Outrageous! He hadn't even seen the property to show anyone around. It wasn't as if he'd worked really hard trying to get anyone in there. The tenant was very happy where she was and had no intention of moving out for a long time. So I asked MA how long I would have to pay this 'finder's fee' for and would it be reduced? His reply was simply that I read the contract that I'd signed with him the first year. So I did. And there it was in black and white "...If the family of the tenant renew the agreement, a further fee of 8% of the annual rent, plus VAT will become payable at the outset of the new agreement. These fees are also payable on any subsequent renewal in future year... “Well that was me gob-smacked! How could I have missed that? I suppose I was just so keen to get someone into the property covering the mortgage, that I didn't read all the small print. I was stuffed really. So I paid up again. :-(

After three years of paying the finder's fee, I tried reasoning with MA, asking about reducing the amount I was paying. I was quite willing to pay a fee, after all, they had found the tenants in the first place, and yes I had signed an agreement, but I didn’t realise it was an infinite agreement that I’d have to pay until the tenant left or in this case died, because she wasn’t going anywhere. But, no, they wouldn’t budge. So when year four came around, I refused to pay. I was going to write my own contract and get the tenant to sign that, unless MA met me half way. (even half the fee -£600 was good money for printing off an edited template. It even got posted back to him! He never saw with either myself or my tenant after the initial papers were signed) but oh no, he wouldn’t have it and instead of arranging to have a chat and see how we could sort things out, he took legal action against me and took me to court.

What a blooming palaver! I had to prepare my defence, submit my own statement and it was almost a year before the hearing took place. Was it really worth the hassle when I didn't really fancy my chances in court? I was tempted to just pay up again, but the problem was, I knew I was right! Still, his contract appeared to be airtight and my chances of winning were slim to none. The best I could hope for was the Judge agreeing that it was an unfair contract and perhaps reduce my yearly payment. But what did I have to lose by going to court? Not that much really. If I lost, I’d have to carry on paying, and okay I’d have court costs to pay, but it was a small claims court so it was a minimal amount - maybe a couple of hundred pounds. If I won, there was a very slim chance I would be released from the contract, with nothing more to pay. Slim indeed, but still a chance. On the other hand, if MA lost he could potentially lose a hell of a lot more than me! And if he won? He wouldn't be any better off than if we hadn't gone in the first place. That was good enough for me. So I was going for it!

However, the day before the hearing was due to take place, I got a call from MA, suggesting we call the whole thing off. I was quite relieved to hear this and expected him to negotiate a new annual payment with me. But no, he said something like ... you know you're not going to win. I don't want to waste half a day in court, so why don't we just forget about it and I'll wave the court costs?... er, hello! Do I come across as a complete moron!? I suggested MA reduce my annual fee to £500. He said no way, so I said I'd take my chances in court, and he hung up.

So we went to court. It was a short hearing and, in hindsight, it was clear that the Judge had looked at both our statements (which we'd submitted before the hearing) and had already decided how it was going to pan out. He went through the usual routine of letting both sides give their evidence and then he laid down the law...
I was being fleeced and the case was dismissed...
That's not quite how he put it, but that was what it boiled down to.

Well I can tell you, I almost fell off my chair! MA stormed out of the room faster than a speeding bullet, slamming the door behind him. Not only did he have to pay all the costs, but he never got another penny out of me. I would have gladly settled for paying £500 a year, a day earlier, now I had nothing to pay. And guess what? My tenant is still in the house several years on. :-)

So the moral is, if you know you're right, go all the way with it. And if you're a greedy son of a gun, you'll probably end up with nothing!