Unfair lettings fees between agents and tenants

Last week I took a look at the guide published by the Property Redress Scheme on unfair agency fees to landlords.

This week I am looking at the guide on fees to tenants.

Fees are legal (but not everywhere)

After stating that complaints about fees is the most common consumer complaint received by them, the Guide starts off by saying that it is currently legal to charge agency fees to tenants in England & Wales (although not in Scotland).

A reader has pointed out to me though that far as Northern Ireland is concerned fees are probably be void under the Commission on Disposals of Land (NI) Order 1986.

General principles

The guide points out that many tenants will be unfamiliar with their rights as regards fees (or indeed anything else) and so agents must explain things clearly, not use confusing jargon or take advantage of tenants ignorance.

Which will include not leaving things out or giving explanations which are ambiguous.

All fees quoted MUST include VAT and tenants must be given time to familiarise themselves with fees before being asked to pay them.

They should also be made aware of what is actually being done to justify the fee. The guide gives the example of drawing up tenancy agreements, which sometimes just involves adding a few names and details to an existing tenancy agreement template and printing it out.

ALL fees should be disclosed to tenants before they sign.  For example they need to be able to compare the cost of one property against another.

So far as general admin charges are concerned, these should be set out clearly as in  “£1500pcm + £150 admin fee per Tenant”.

Examples of other fees agents may seek to charge tenants include

• application processing fees such as reference and/or credit checks
• fees for the initial setting up of the tenancy, including inventory costs or other administration fees
• fees which must be paid in certain circumstances, such as charges for additional Tenants, the use of a guarantor or pets
• any future fees likely to be incurred by the Tenant, for example, costs to extend, renew or terminate the tenancy and inventory check out fees
• Money for a ‘holding deposit’ including the sum that is required and the circumstances in which it will/will not be refunded – it will however be deemed unfair if a holding deposit is deemed to be non-refundable in any circumstance.

These fees should not be buried in the small print of the contract but specifically drawn to the tenants attention before they sign (and the agent needs to be able to prove that he has done this).

Note also if these fees have been charged to the landlord, the agent is not entitled to charge the tenant too.

Repair and maintenance fees

Note here that

• Repairs which are the tenants responsibility and which they will be asked to pay for must not be done without their consent
• Contract clauses which require the tenant to pay any charge set by the agents will almost certainly be void
• Agents also cannot require tenants to do things which are the landlords responsibility under their statutory repairing covenants or under regulations such as the gas regs.

Renewal fees

Tenants must not be charged for holding over under a statutory periodic tenancy or told that they have GOT to agree to a new fixed term agreement.

It will also be unfair to make a charge for renewal which was not drawn to their attention before they signed the first tenancy agreement.

The guide points out that agents can always serve a section 21 notice on tenants and require them to vacate if they do not agree to charges, so tenants are not in a strong position.

However I would add here that this may not be with the consent or agreement of the landlord.

Sometimes agents will try to get tenants to leave, if they are not paying renewal fees, so they can then charge the landlord for finding a new tenant.

So if you are being told that you must either pay a renewal fee or leave, you may want to try contacting the landlord to see if they do in fact want you to move out. Often they will have no idea what the agent is doing in their name.

Termination and cancellation fees

Again, agents must be fair here and not seek to impose additional fees which tenants were not told about at the start, and tell tenants they can’t move out unless they pay them.

In particular I would add here that agents cannot force tenants to give notice or pay a fee if they are moving out at the end of their contractual fixed term.

So far as checkout fee are concerned, it is fair for tenants to pay for the inventory clerks fees at the end of the tenancy if the landlord has paid the check in fee at the start, but tenants should not be expected to pay for both fees, and they must be told about the charge before they sign the tenancy agreement.

Ideally it should be written in the tenancy agreement.

What you should do if you are charged an unfair fee

• First you should write to the agent and make a complaint. Keep a copy of the letter.
• If the agent does not deal with it satisfactorily, you can then make a complaint to the agents Redress / Ombudsman scheme.
• All agents MUST now belong to a scheme (there are currently three) and they should let you know which scheme they are using.

Note however that if the complaint relates to deductions from a tenancy deposit, you need to apply for adjudication via the tenancy deposit schemes adjudication service, as the Redress Schemes cannot deal with this for you.

You will find guidance on how to make the complaint to the Redress / Ombudsman Scheme on the scheme website.

If the agent is not a member of any redress scheme, then you should contact the tenancy relations officer at your Local Authority and make a complaint.

The LA should then contact the agent and threaten enforcement action if they do not join a redress scheme immediately (and deal with your complaint).

If the agent is not a member of a redress scheme, I would also suggest that you are probably safe to withhold payment for the fee  (assuming it is arguably unfair) – as if they were to sue you for it, the Judge would take a very dim view of their failure to belong to a redress scheme and is unlikely to find in their favour.