Agency

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 A letting agent is priviledged with special powers which authorise him to carry out certain duties on behalf of the client landlord. The landlord is his principal, and the nature or extent of the powers conferred in the agent will be set out in the agency agreement.

The relationship between a letting agent and landlord is a fiduciary one, meaning that it is a relationship of trust and confidence.  As McCardie J said in Armstrong v Jackson [1917] "The position of principal and agent gives rise to particular and onerous duties on the part of the agent, and the high standard of conduct required from him springs from the fiduciary relationship between his employer and himself. His position is confidential. It readily lends itself to abuse. A strict and salutary rule is required to meet the special situation."

The landlord is the letting agent’s principal, as without his authority the letting agent has no power to act for him. An agent has numerous duties towards the landlord principal due to the landlord’s reliance on his loyalty and good faith. A letting agent must:

  • not put himself in a position where his own intersts conflict with those of the landlord,
  • obey the landlord’s instructions,
  • perform his contractual duties to the landlord with care and skill,
  • obtain the landlord’s consent to any delegation of the letting agent’s duties,
  • account to the landlord for relevant documents and for all of the landlord’s money,
  • not obtain a benefit for himself by taking advantage of his position or the landlord’s property, and
  • not take bribes

The Agency Agreement

The powers conferred on the agent will be set out in the agency agrerement, are likely to include authority negotiate the terms of the tenancy, prepare the paperwork, sign a contract and agree a lease.

Generally, the agency agreement does not have to be created formally, such as in writing or by deed. The agency agreement need only be by deed where the agent is given authority to negotiate tenancies that must themselves be granted by deed.

Tenancies or leases granted for three years or less, including periodic tenancies and all shortholds, do not have to be created by deed. Therefore, an agent can be given authority to grant such a tenancy on behalf of the landlord without a formal agency agreement.

However, in order for the agent to be able to grant a lease for over three years, the Powers of Attorney Act 1971 requires that the landlord and agent must have entered into a deed setting out that the agent has this authority. This is because leases over three years must themselves be executed by deed.

Agent throughout the tenancy

It is common to find agents who have been given authority to deal with day to day problems such as disrepair and maintenance of installations and services. Agents should note that the landlord will be bound by the acts of the agent acting under actual authority granted by the management agreement. For example a landlord will not be able to avoid liability for an agent acting with actual authority who arranges ineffectual repairs or who incurs greater expense than the landlord may be inclined to pay.

As long as the management agreement between the landlord and agent is clear then it should be possible to determine the scope of the actual authority the agent has. This authority will come from the written terms of the agreement, express words passing between the landlord and the agent or it will be implied from the conduct of the parties. For example where the landlord tells the agent to manage the property on a day to day basis, the agent will be authorised to deal with things that arise within the usual scope of day to day management.

Authority could be extended to collecting rent, chasing arrears or dealing with an advice agency in the event of a dispute about repairs. Implied authority would almost certainly not extend to issuing legal proceedings for possession or the recovery of arrears, which might involve the landlord in expense.

Such steps would normally require actual authority being given expressly. If an agent did issue proceedings without authority she/he would risk being sued by the landlord for any loss incurred resulting from the proceedings. The tenant could also take action for breach of the implied warranty that the agent did have the authority to act in this way.

Charging Fees

One of the agent’s most important legal duties is his fiduciary duty to the landlord (including the duty to account). Because this duty runs to the heart of the agency relationship, a breach of this fiduciary duty allows the principal to dismiss the agent and claim damages.

Under this duty, the agent is required to disclose all relevant facts in financial transactions so as not to make secret profits, take bribes, not to put himself in a position where his interest and duty conflict unless there is full disclosure to the principal. Under this duty, it is only acceptable to take commissions or secret profits from a third party if there is full and informed disclosure.

Section 85(1) of the Consumer Rights Act 2015 requires letting agents to publish a list of ‘relevant fees’ payable by landlords and tenants where it is likely to be seen at each office and on their website. The list of fees must include a description of each fee providing an understanding of the service or cost that is covered by the fee. Where the amount of fee cannot be reasonably determined in advance a description of how that fee is calculated must be published. The amount of the fee must be displayed as inclusive of VAT.

Agents are also required to publish with the list of fees a statement of whether the agent is a member of a client money protection scheme and details of which redress scheme the agent belongs to.