Agents getting money from my contractors

[MarkyW]

Hi,

I have just discovered that my letting agent (who manages my properties) is charging commission on the work that contractors (builders, plumbers etc) do on my properties. Thus if I get a plumber in to do a minor repair, the agent will charge the contractor a percentage of the cost of the work done.

I have only just discovered this as it was not made explicitly clear to me in the terms and conditions when I signed with this agent.

However it is my very strong belief that the agent has not done anything to ensure that the contractors have not simply charged me more for the work they do, in order to pass on to this extra commission to the agent. I have asked them and they say they haven't done any checks to make sure this wasn't happening and have no system in place to prevent it.

Firstly - given that they are taking these backhanders, do you think the words in the small print are fair and explicit enough to explain what they have been doing? Also can I reasonably expect that they tell me what these payments are, who they are paid to and how they are levied (as a flat fee or a percentage of the work that I have asked to be done)? They are registered with the Property Ombudsman which has this requirement:

"14b You must tell your client in writing as soon as reasonably possible when you find out about circumstances that give rise to a conflict of interest. This would include where you or any connected person own, or have a financial interest in, a business or contractor engaged to provide services to a client".

Would it be fair to say that, if they are getting these payments from these contractors, that that constitutes a "financial interest" in those contractors?

I'd also love to know if anyone else has this situation with their managing agents!

Thanks v much.

[Melboy]

All LA's will charge a handling / organising commission fee on top of the invoice sent to them by plumber's or electricians or whoever attends to the problem being reported to the LA for engaging contractor's to repair any faults with your property on your behalf.

If you don't want to be a party to this arrangement then say so at the time of engaging an LA to manage your property as many landlord's do.

Always read the small print of any contract before signing. If in doubt then seek advice from a third party or legal representative.

Anything you have read and you don't like the sound of what your reading discuss this at the time with your LA and have it removed from your contract before accepting LA's T&C's.

[MarkyW]

Hi Melboy, I have asked another local agent and they say they do not charge anything extra, taking the management fee I give them as payment enough. I would have said I did not want to pay this extra charge if I had been told about it when I signed up, but had no idea this was going on.

I did of course read the small print but my point is that what they are doing is not clearly, fairly and transparently laid out (in my opinion) and seems like a breach of the Property Ombudsman's terms of declaring a "financial interest" - that's my question, and whether it is reasonable to expect them to tell me if they are doing this and how.

[Richlist]

It seems to me that the terms & conditions are quite clear and in my opinion anyone reading them, as they should prior to signing, would understand what they are agreeing to.

Now, wether the clause would be considered to be 'unfair' in court is anyones guess.

Just because you don't like the clause doesn't release you from your obligation to question it or to ensure you understand it prior to signing the agreement.

[MarkyW]

It isn't an issue of not liking the clause, it is whether it has been properly applied - how can they be "satisfied" that I am not being charged more for the work they do if they have not asked it of their contractors and have no means of checking? It is then fair and reasonable for me to know what these payments have been or at least the way they have been applied, and whether they can fairly be said to have a "financial interest" in these companies if they are making money through their relationship with them?

[Richlist]

how can they be "satisfied" that I am not being charged more for the work they do if they have not asked it of their contractors and have no means of checking?

That would depend on specifically what the work was. The agent will probably have lots & lots of experience of getting repairs and maintenance carried out. Therefore its reasonable to assume they will have a very good idea of what is normally charged for a whole list of standard repairs.

[Melboy]

Firstly - given that they are taking these backhanders

Most reputable LA's insist on at least 3 requirements from a their companies and tradesmen undertaking work on their behalf for landlord's.

1. VAT registered.

2. Fully insured & certified with public liabilty insurance to £5,000,000

3. Fully ceritified... ie. Gassafe registered or Part P qualified for electricians etc.

We charge £65 inc. VAT for a gasafe landlord's certificate. We can do it for this money because we have a lot of rented properties covered by the LA. The LA charges the landlord £85 inc VAT as a commission charge for organising this service on behalf of the landlord. I am not aware of any landlord requesting what we charge and I doubt I would reveal it either as a business confidence. Not unreasonable imo

In your case if you have a particular problem with your LA and your contract then you must take that up with them in the first instance and await their reply to your question.

If your not satisfied then ask your LA to release you from that clause and to allow you to undertake all the additional work or repair that may arise in the future by bringing in your own people.

[Grampa]

All LA's will charge a handling / organising commission fee on top of the invoice sent to them

We dont, but we do get the odd bottle of whisky and wine at xmas and if i needed anything done at home I may get a reduced bill but I dont ask for it.

There is always the danger that the bill may be a bit higher with these type of arrangements and letting agents have all sorts of buisness models to make up their fees. The rates may seem attrative with one agent who charges a low % but they will make it up in other ways. Or some agents will try and screw as much as possible out on the landlord. This I find more with the bigger well known muti office agencies.

The devil is in the detail as Richlist says and if you dont like whats written in a contact, dont sign it or ask for it to be amended.

I think the bottom line is, were you charged the going rate for the job done and was it done correctly and professionally? If the answer is yes, whats the problem?

[MarkyW]

That is indeed the question, and the answer is not at all certain. The work was done correctly and professionally but it entirely the nub of the question whether it was done for "the going rate". I can see plenty of reasons to suggest it might be more, centred around the fact that the more the contractor charges, the more the agent makes!

And I don't regard it as transparent and honest if, to use the example above, I get a quote for a Gassafe Landlord's certificate for £85 and then find that the contractor has been obliged to hand over £20 of that, which doesn't appear on my invoice or isn't revealed to me in any way.

[Grampa]

Yes but if the bill is within the upper or lower rate of what is acceptable for that job, which I would consider it to be, my question still stands. What is the problem? After all if you called Melboy direct you wouldn’t have likely to be have given the lower reduced rate.

If you could get 2 other contractors to state a job was overpriced you may have a valid argument against your agent but without you are just guessing.

Going forward though, why don’t you in future give the agent the instruction not to do any works what’s so ever unless they run it pass you with the price first. It puts the ball back in your park.

[Melboy]

And I don't regard it as transparent and honest if, to use the example above, I get a quote for a Gassafe Landlord's certificate for £85 and then find that the contractor has been obliged to hand over £20 of that, which doesn't appear on my invoice or isn't revealed to me in any way.

We don't hand over anything to the LA. We Company invoice the LA for work done.. LA then charges the Landlord. The contract is for circa. 200 plus properties over the year therefore discounted rate does apply but we have to bid for that work just like in any other business in the building and associated trades.

The LA has made it crystal clear on the charges made to landlord's for most routine inspections etc.on their website.

Like I said before if your not happy with what your LA is undertaking on your behalf then only you can resolve the problem that you have. Most LA's on the bigger jobs will obtain quotes before proceeding and obtain the landlord's permission before doing so.