YOUR forum questions answered: Early termination fees and invoices

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The hugely popular LandlordZONE forum is a friendly community where landlords share their experiences, exchange tips and ask for advice. Here we answer a recent question and ask the experts at Hamilton Fraser to give their best answer!

The question:

The tenant wants to leave the rental property before the end of the tenancy and is questioning whether the early termination costs the agent is asking for are reasonable. The landlord is happy to agree to an early termination of the tenancy, providing another tenant can be found and the tenant carries on paying the rent in the meantime. The tenant intends to help find a replacement tenant themselves. Are the costs proposed by the agent for early termination reasonable?

The answer:

Suzy Hershman (pictured, below), Head of Dispute Resolution at mydeposits, part of the Hamilton Fraser family, explains:

We’ve been getting a lot of queries relating to the topic of early termination fees at mydeposits recently, highlighting that many tenants, landlords and agents don’t yet fully understand the importance of providing evidence in this type of scenario, following the implementation of the Tenant Fees Act (TFA).One of the changes the TFA introduced when it came into force in 2019, was changes to early termination fees. Although the TFA prohibited agents and landlords from charging fees to tenants, the act clearly lists early termination fees as a ‘permitted fee’ – one that can be charged to a tenant.

But, although early termination fees can be charged to a tenant, any early termination charges must be reasonable, clear and backed up by evidence of their actual costs. This is quite a significant change – before the TFA came into force, if a tenant disputed early termination fees and a case went to a mydeposits adjudicator, we would award if the tenant had simply been given a cost breakdown of the re-letting costs and any commission fees. The tenant could then choose whether to accept and move out or disagree and stay. If the tenant disputed the fees, we would have been unlikely to accept a dispute, although we might have taken a view in relation to the ‘reasonable’ test (which I’ll explain below).

The key change, following the TFA, is that agents and landlords must prove that they are out of pocket as a consequence of the tenant ending the tenancy early, by providing evidence in the form of invoices for the actual costs incurred. Before the TFA, we did not require invoices to make an award. Now, if the tenant disputes the proposed cost, the landlord or agent will only be able to charge fees if they have invoices to prove the loss.

Agents may generate their own invoices if the property is fully managed, or landlords and agents may have separate invoices for costs such as marketing the property or referencing prospective new tenants. All of this will be valuable evidence when it comes to proving reasonable costs.

We do have some discretion when making decisions, and this is where the ‘reasonable’ test comes in. This could apply to the specific question in the scenario outlined on the Forum, if the tenant is successful in finding a replacement tenant. It is likely to be unreasonable to award a claim of £750.00 for re-letting fees where a tenant has asked to leave early, disagreed with the proposed costs, and found the new tenant themselves before leaving. My view is that a landlord or agent would have difficulty proving this is their actual loss.

Likewise, with commission fees, it would be unreasonable to make an award where the evidence shows the agent has agreed to waive the outstanding commission in return for re-letting the property and fully managing it.

Although this approach adds more work for landlords and agents at the evidence gathering stage, ahead of a discussion or dispute, this more thorough way of doing things ties in with the transparency and clarity required by the Tenant Fees Act, and everyone knows where they stand, the tenant included.

At mydeposits, we’ve been getting a lot of questions recently on this topic in response to our new Early termination fees guide, which also provides more information on what you need to know about both re-letting and commission fees. You can read a more detailed article are sending out to our members on early termination fees and the importance of providing evidence and invoices here.

Join LandlordZONE’s forum here.

Hamilton Fraser supports landlords, letting agents and tenants by offering a range of solutions and thought leadership to help them navigate the private rented sector. Most recognised in the private rented sector for providing award winning landlord insurance, the Hamilton Fraser family includes Total Landlord Insurance, mydeposits, the Property Redress Scheme, Client Money Protect, Landlord Action, Ome, HF Assist and Total Landlord Mortgages.

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Selling a company with real estate portfolio?

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I’m a small incorporated landlord with a portfolio of 40 individual real estate units, namely garages. I am now considering liquidation of the company with an obvious route being selling the garages on an auction as individual lots.

Having a naturally inquisitive mind I’m trying to invent other options of achieving the same result.

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Are local authorities suppose to charge for giving Notices now?

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I am unfortunate to be given 2 Notices of improvement and a Prohibition notice because an enforcement officer decided to hand-deliver an Inspection Notice to my residential home. Incidentally, we were under self-isolation for none symptomatic covid -19.

The officer staked in his car until he saw my wife come out to put the rubbish in the wheely bin.

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Stamp Duty on Form 17 split?

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Quick query about stamp duty. My wife and I own 4 properties 50/50 as tenants in common. We have a partnership (not an LLP) i.e. our self-assessments show income from partnership to declare this property income.

We want to keep the ownerships as 50/50 but want to split the partnership to 80/20 so take advantage of my wife’s lower tax rate.

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Campaigners claim new security law will give police ‘free hand to help rogue landlords’

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Many landlords may not be sympathetic, but the London Renters’ Union says the Police, Crime, Sentencing and Courts Bill making its way through parliament will criminalise its protests.

The pressure group, which regularly pickets landlords and estate agents to fight for tenants’ rights, fears the bill – with its aim of beefing up police powers to crack down on protests – will affect its ability to stage actions when lockdown restrictions ease and encourage what it believes is police bias towards landlords.

The flagship crime legislation, currently being debated in the Commons, would give police forces more powers to tackle significantly disruptive ‘non-violent’ protests and in particular Extinction Rebellion-style civil disobedience.

Stop and search powers could also be expanded if plans for serious violence reduction orders get the go-ahead.

London Renters’ Union says the bill effectively criminalises protest. A spokesman explains: “Our movement has always been based on our ability to use public protest as a way of putting public pressure on landlords and estate agents.

“We also use peaceful protest as a way of stopping evictions and keeping members in their homes. Over the past year, we have seen police intervene on the side of landlords, actively facilitating illegal evictions.

Stop protest

“With increased powers to stop protest, our ability to take action to support our members is under threat.”

Instead, it’s demanding that the National Police Chiefs Council adopts a new Charter for Freedom of Assembly Rights.

This includes an end to treating direct action and civil disobedience as an excuse to shut down protests completely and an end to routine surveillance of protesters and excessive use of force and the targeting of organisers for arrest, surveillance and punishment.

The union is also encouraging supporters to sign an online petition against the new laws, which already has more than 165,000 signatures.

Read more about the Police, Crime, Sentencing and Courts Bill

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The state of the Landlord Insurance market – March 2021

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The past year has been tough on most due to COVID, however, Landlords can take heart from a very healthy insurance market that continues to compete for their let buildings and contents insurance. The cost of landlord insurance depends largely on the insurer that you speak with.

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TikTok ‘property gurus’ warned by regulator to be clear about sponsorship links

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A TikTok celebrity couple from Rugby have been reminded by the Advertising Standards Authority (ASA) that their posts must be labelled as sponsored content if they are paid to produce them.

Twenty-somethings Summer Newman and her partner Matt Mellor have attracted a 200,000+ following on the social media platform using a familiar sales patter.

The pair, whose business has received glowing reviews from several UK tabloids including the Daily Mail, describe themselves as property deal sourcers for ‘cash rich, time poor’ investors.

The pair are also landlords, and say they have a portfolio in their home town, Rugby.

Newman has now begun using her sizeable social media following to promote their £797 ‘Mastermind’ property investment club, while also keeping their followers entertained with tours of super-luxe properties for sale including a prime newbuild development in Nottingham called The Knoll.

Her other main social media outlet, an Instagram account, was set up in 2013 when Summer was in her early teens featuring pictures of Lamborghini cars and multiple trips to Asian and other exotic destinations. She and her boyfriend also have a popular joint YouTube channel.

Get rich quick

Their shtick is not a new one, but has a ‘get rich quick’ ring to it that appeals to their Millennial followers and who they say, like them, can enjoy an apparently luxe lifestyle by purchasing under-valued properties off ‘motivated’ vendors and then, on behalf of investors, refurbishing and selling them on for a 20-25% profit.

The couple say they then charge a £2,000 to £10,000 fee depending on the property value.

ASA rules say that if a TikTok creator has been paid to post content, it must be labelled as such. But in the past it has not been clear whether the couple’s property tours have been sponsored or not.

They have told The Times that estate agents and developers are happy to let them film their property tours for free, and only pay the couple expenses such as parking charges. This is somewhat puzzling – very few if any of their young followers on TikTok are likely to be target buyers for such expensive properties. The Knoll is currently for sale at £4.5 million.

Pic credits: GuyPhoenix.com and Summer Newman/TikTok

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – TikTok ‘property gurus’ warned by regulator to be clear about sponsorship links | LandlordZONE.

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Charity asks public to donate £10 to help ‘depressed and anxious’ private tenants

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Housing charity Shelter has launched a fund raising campaign to help it deal with struggling renters as research shows one in four (27%) fear becoming homeless due to the pandemic.

The charity’s latest poll of 551 private renters in England reveals they have fared particularly badly during the last year, with nearly half (47%) reporting that they are more depressed and anxious in light of the pandemic – almost double the rate of the general public.

It points to a quarter of private renters who have seen their income drop in the last six months; 24% of private renters have had to borrow money to pay their rent, while 18% have cut back on food or skipped meals.

The charity reports that two-thirds (63%) of calls answered by its emergency helpline in the last year were from people already homeless or at risk of homelessness.

It has hired 26 new housing advisers, doubled the number of calls answered by its free helpline and has now launched an urgent appeal for public support, Lives on the Line, asking for donations of between £10 and £80.

Chief executive Polly Neate (pictured) says: “Through our helpline we have seen just how scared people are about their homes and their futures. People’s lives are literally on the line. They are desperately struggling and the threat of homelessness is very real.” 

Franz Doerr, CEO at rental tech firm flatfair (pictured, below), believes the ban on bailiff evictions has not properly addressed the crisis engulfing the rental market.

“Mountains of arrears are piling up at the feet of landlords who are effectively being asked to prop up the market, yet the government has offered next to nothing by way of support for them,” he says.

“The government must urgently provide clarity to both landlords and tenants on how it proposes to help struggling renters repay their debt. Failure to do so will ultimately lead to landlords exiting the market, meaning there will be fewer affordable homes for rent.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Charity asks public to donate £10 to help ‘depressed and anxious’ private tenants | LandlordZONE.

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SHOCKING PIX: Slum landlord pair fined £300k over squalid and overcrowded HMO

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Two rogue landlords and their companies have been fined more than £300,000 after being found guilty of housing 18 tenants in a squalid Bristol HMO.

Adam Habane, 51, of Dove Street, and Lloyd Beckford, 60, of Lower Ashley Road, split the building in Lower Ashley Road into seven poorly converted flats, where families, including six children, were forced to use cramped filthy bathrooms and inadequate damaged kitchens (pictured).

When Bristol City Council’s private housing team visited in September 2019 there were no operating fire alarm systems; their concern for the residents’ safety was so great that they immediately provided battery operated smoke detectors.

The property also had holes in the ceilings and hallways which meant fire and smoke could easily pass within the flats, as well as obstructed fire escapes, doors that didn’t shut or lock and electrical systems in poor repair.

After the visit, some of the families were moved on or rehoused and the council continued enforcement action, but in March 2020 they returned to the property after tenants complained there was no hot water or heating.

Requests ignored

This time they found similar conditions along with a broken boiler. A request for gas and electricity safety certificates was ignored.

At Bristol Magistrates Court, the pair were convicted of poor management of an HMO and failure to provide information about the property.

The companies managing the property, Ashley Marketing Services and Eunicareltd Ltd, and their directors Habane and Beckford were handed fines and costs of £334,500.

Councillor Helen Godwin (pictured), cabinet member for women, children and homes, says: “We are committed to protecting people in private housing against the risks posed by poor property management and unacceptable conditions.

“This case illustrates clearly that we will use appropriate powers to prosecute those who put tenants in danger through their own neglect or sub-standard practices.”

Read more: Bristol HMO regulation ‘a mess’.

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How to find Shops & Tops for commercial to residential conversion

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I take a stroll down the high street and share what to look for when searching for retail property to convert to residential use under Permitted Development Rights.

Watch this video to find out for yourself, and join us this Sunday for a FREE live 90-minute masterclass where you can learn more on the subject!

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