Agents warned not to pass costs of arranging repair work on to tenants

Letting agents were last night advised that if they charge commission on repairs to damage caused by tenants, then the cost of arranging the work should not be passed on to the tenant.

ARLA Propertymark said it sought Counsel’s Opinion following the Tenant Fees Act.

ARLA said that the answer was not contained in government guidance, which is why it asked housing barrister Erol Topal.

ARLA said it has been “contacted by many members about what can be charged to tenants for ‘contractual damages’ since the ban.

This is the illustration:

When a tenant has caused damage by blocking a toilet by flushing nappies down it and the landlord instructs their agent to arrange a plumber, can the landlord pass on the agent’s 10% commission as well as the actual costs of the repair?

Counsel’s Opinion is that this would be against the spirit of the legislation.

It might only be possible if there were a clause in the agreement making it clear to the tenant.

However, the Opinion states that the clause might be subject to challenge under consumer protection law.

If this were deemed an unfair term, the agent could be liable for a penalty.

ARLA says it is not changing its own standard contracts, and advises that agents’ commissions on repairs should not be passed on to tenants.

The full Counsel’s Opinion concludes that the agent’s cost of arranging repairs is not recoverable from the tenant.

It also warns that the risks for breaching the Act are severe and warns agents that “serious consideration” needs to be given to the penalty imposed in relation to any attempt to recover relatively small amounts of money.

The full Opinion is here:

i.emlfiles4.com/cmpdoc/6/9/5/5/4/files/625162_arla-propertymark-legal-advice—tenant-fees-act-2019.pdf?utm_campaign=10868868_Counsel%20opinion%20-%20Tenant%20Fees%20Act&utm_medium=email&utm_source=dotmailer&dm_t=0,0,0,0,0

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12 Comments

  1. David Clark

    Who charges a commission on repairs these days anyway? What’s the management charge for?

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    1. singlelayer

      Each set of management terms will be different – even, possibly, within one agency. The basic charge *may* only include the collecting of rent and producing a monthly statement, for example. In any case, commission and costs [of arranging the work] are two subtly different things. Ultimately, *if* the agreement between the agent and the landlord does indeed make provision for the charging of costs of arranging works, this then forms a part of the overall total for the cost of the repair and, as such, the landlord should be allowed to recover this from the tenant. You and Counsel have made an assumption that all management agreements include the arranging of work.

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      1. Woodentop

        Like replacing lost keys and providing tenants access! Tenants are responsible for their covenants in the tenancy agreement and expenses.

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  2. Eyereaderturnedposter12

    Should the legislation not address a particular fee or manner in which a particular fee may be charged…why on earth is ARLA taking it upon themselves to advise Its PAYING members, against levying a charge that isn’t prohibited…?

    With the current political and industry landscape…I can’t be the only one thinking “did we lose the Cold War after all?”…These red flag waving extreme left-wing characters seem to be everywhere…

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  3. Lettingagent21878

    We will continue to do this but thanks for the warning

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  4. LovePropertyBiz

    Is it not the case that any agent fees charged to tenants that are not expressly allowed by the Act are prohibited?

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    1. singlelayer

      Yes, but this article is about whether the landlord can pass on the costs (is any) charged by the agent to the landlord specifically for the arranging of the work.

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  5. Ian Narbeth

    The legal opinion is necessarily cautious because the Tenant Fees Act hasn’t been tested in court yet. It seems wrong that if the landlord is obliged to pay the fee to the agent it should not be recoverable as damages from the tenant.

    That said, I expect that agents will simply ask the builder/contractor to add 10% to their bill and pay an equivalent sum in commission to the agent. That way the landlord is invoiced the full amount and passes it on to the tenant.

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    1. GeorgeHammond78

      Ian Narbeth – yes, scummy isn’t it!

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    2. singlelayer

      Cautious is completely understandable because of the reasons you state, Ian but they are incorrect about the spirit of the legislation. Before the TFA a tenant did not have the ability to choose which agent to get a particular property from (as the landlord is the agent’s customer) and the Act addressed this lack of choice of the tenants part by removing fees altogether; in this example, the tenant does indeed have a choice whether or not to cause damage. 

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  6. HIT MAN

    It’s pretty simple if your AST states certain issues are the responsibility of the tenant such as blocked drains, simply tell the tenant that it’s their responsibility as stateD in the AST and they have the permission of the landlord to instruct a professional to complete any necessary work, you could in fact recommend a tradesman and get a referral.

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  7. Realitycheck97

    Years ago at Court I substantiated charging £25 to issue a late payment letter. So a small fee to cover the costs of work is reasonable.

    Charging a sum to arrange for a plumber is part of the cost of that job, because you don’t work for free. Like a delivery charge for a replacement bathroom sink. A cost for work done. That sum is billed to the landlord as part of the overall cost of the job.

    The question is, can the admin charge be recovered from the tenant in the same way the delivery charge could be (imagining the tenant had damaged the bathroom sink)? Or should the landlord separate out that charge from the other costs before requiring the agent to recover?

    If the spirit of the legislation is such that no reasonable costs issued by an agent to remedy damage caused by the tenant even though that cost is borne by the landlord, then that needs testing, because it clearly is iniquitous. Happily, it is readily defeated by charging the contractor a fee, say for H&S supervision, which is a genuine job you normally do without charging for. The contractor will factor that cost into their quote.  Do I do this? Nope. But I know those that do.

    Better for legislation to allow transparent recovery of legitimate costs than drive complex, less transparent behaviours, no?

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