Is it normal for a letting agent to charge a renewal fee?

Q: My tenant has just asked to renew their lease for a second year but my letting agent is charging a renewal fee of 8% of the annual rent. Is this normal?

A: Unfortunately, if your tenant stays beyond the first year, a renewal fee being charged by your letting agent is standard. If a tenant stays for a second year, the usual fee is 8% of the annual rent and 6% for a third year. On top of that, the letting agent will usually charge you for drawing up a new tenancy agreement, too.

These fees can be frustrating for both the landlord and tenant, and many people question how much work is really done on the agent’s part. An estate agent will argue that the tenant is only there because they found them in the first place, and they do have a point. But this can push some landlords to sneakily try and cut out the agent by secretly signing a second year tenancy agreement with their tenant, without the agent knowing. However, I would never advise a landlord to do so.

If you are appointing a letting agent, always check their small print before you sign their terms as the contract should outline any renewal fees. Do remember that these terms can sometimes be negotiated, so you can always ask if the letting agent will reduce their renewal fee – although ideally you should ask before signing their terms. In your case, as your tenant is already in place, you could try to speak to the letting agent and say that you will accept the tenant for another year but only if they reduce their renewal fee.

There are very few occasions where the renewal fee will be entirely waived. If your property is being managed by an independent property management company they can sometimes get the fee waived, but this is because they have more clout than an individual landlord. We do this for our landlord clients and it makes a big difference to their net yield if their tenant stays for additional years.

If you have a question you’d like Jo to answer please email or tweet her @joeccles.