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Sell Property To Tenant? Landlords Beware - Big Commission Fees!

A Truly Objectionable Clause?

When a landlord wants a letting agent to find a tenant, the landlord expects initially to pay a commission to the letting agent known as a "finder's fee".  This finder's fee initially in the mind of most landlords was to pay the letting agent a percentage of the first year's rental income for the property usually about 9 - 12 % of the rental.  When the letting agent hits the landlord for another rent renewal fee each time the tenant renews the let property the landlord is surprised but pays.  As we now know however, these renewal fees can be challenged - click here to claim back rent renewal

But what if later into the tenancy agreement the tenant wants to buy the property of the landlord?

Clause 5 is said to contain further objectionable provisions providing for commission to be paid in the event of a sale of the property to a tenant, and to provide unfairly for the continuation of the commission obligation where the landlord sells his interest in the property. It reads:

    "5.0 Sales provisions
    5.1 Sale of property to tenant
    In the event that the tenant, occupant or licensee of the property enters into an agreement with the owner/landlord to purchase the property, a commission of 2.5% of the purchase price becomes payable by the owner/landlord to  Foxtons  when contracts for the sale of the property are exchanged.  Foxtons  reserves the right to defer payment of this commission until completion.
    5.2 Sale of property by landlord
    Where a property is sold, transferred or otherwise dealt with, with the benefit of a tenancy,  Foxtons ' fees remain the responsibility of the original landlord for the duration of the tenancy and for any extensions, renewals or periods of holding-over, irrespective of whether negotiations were carried out by  Foxtons . The landlord should instruct his solicitor to assign responsibility for  Foxtons ' fees to the purchaser."

    The shorthand used in this case for those commissions are "sales commission" and "third party renewal commission" respectively.


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