Agents are being warned that that they must act reasonably when returning deposits after a First Tier Property Tribunal handed down a ruling on the Tenant Fees Act.
It ordered Ludlow Thompson to pay back £343 to a tenant of a shared house in Leighfield House, Hackney, after he left the property and was sent an invoice for the switch of new tenancy agreement featuring the new occupant.
The tenant agued it was a prohibited payment under the Act, and the court agreed.
According to the Tenant Fees Act 2019 a fee can be charged where a tenant wants to leave early and replace themselves with an alternative tenant. However, the fee chargeable is limited to be either £50 or “the reasonable costs of the person to whom the payment is to be made in respect of the variation, assignment or novation of the tenancy”.
David Smith, partner at JMW Solicitors, said: “This will be a problem for many agents who charge their actual costs for these changes, which are usually over £50. The other problem will be for tenants.
“There is no obligation on a landlord to agree to a change of tenants and if agents are going to be limited to a fee of £50 they may look to recover the additional expense from landlords who may then simply refuse to agree to a change of tenants.
“I doubt that Ludlows will appeal but I think they should. The Tribunal seems to me to be completely off base on this decision. This case will undoubtedly cause difficulties for agents until it is appealed to the Upper Tribunal and a binding decision is obtained.”
Comments (15)
The tenant fees ban document is such a poorly written document that you would think a 16 year old had written it, you can charge £50 or more if you can justify the cost but no guidance about what is a justifiable cost above £50.
A charge of £50 will not cover the cost of a resign up, deposit renewal documents and new/updated inventory, ask any letting agent or solicitor what they would charge to re sign up a group of 7 students!
There is also no guidance on the effect of inflation on the quoted £50 from when the tenant fees document was produced. The NRLA need to back Ludlow Thompson for a legal challenge against this decision so that an intelligent pricing structure can be arrived at.
Being a Scottish agent I’d love to be able to charge £50!
No fees whatsoever can be charged to tenants up here.
#hateSNP !!
Yet the SNP is re-elected every time.
Surely that’s why you have a contract, on the other foot the Landlords brother was coming to stay for Christmas and needed a place to stay so you ask the tenant to leave. just say no !
I wonder how much a Solicitor charges for a drawing up anew tenancy, and of course the check out report for the deposit scheme., and the updated inventory for the new tenant which will be required if they dispute anything.
For at least 25 years solicitors have been largely redundant in drawing up tenancy agreements between landlords and tenants; technology overtook that in 1989 and was properly established by 1995.
The law has banned fees on tenants and that’s the end of the matter. Agents who try to circumvent the law are exposing themselves to fines and are putting themselves at the mercy of their competition who will very quickly highlight their wrong doing.
There’s really no point appealing the decision;the solicitor fee to consider appealing will likely cost more than the fine.
Robert, The law has not banned fees to tenants, there are fees that the law permits; however, it is very unhelpful for legislation to use words such as “reasonable” as that comes down to interpretation.
In my view it is reasonable to charge tenants a pro-rata charge based on the remaining term to cover our fees to landlords for setting up a new tenancy i.e. 12 month fixed term tenant leaves after 6 months, tenant and landlord share the cost 50/50.
However, I can see charges coming in high for a tenant where a landlord incurs an upfront tenant find fee, say 10%; why would a landlord agree to end the tenancy early so they can incur another 10% tenant find fee after say 6 months. If a tenant is willing to split this fee, recognising it is to their financial advantage, why should The Tribunal take issue?
In the case above, I would expect an agent to provide the tenant with what their charge would be in advance of changing tenants; and, assuming that was the case, then it suggests the tenant agreed to the charge only to complain afterwards, which seems very unfair on the landlord/agent as they would not have agreed the change in the first place. If the agent did not provide fees in advance, then they were asking for trouble.
Given what we have to go on here the agent attempted to charge a tenant a fee of £343 for what would be about 2 minutes work on most CRM systems. A new tenancy agreement with a different name on it In anyone’s book that’s excessive
I’d very much like to know what CRM system you are using; a change of tenancy is *considerably* more than 2 minutes work.
How to change a name on a tenancy agreement:
Receiving new tenants information
Carrying out reference checks on new tenant
Carrying out Right to Rent check
Adding new tenants details – depending on the CRM depends on how you do this.
Generating new tenancy agreement. Circulate to all parties, usually digital signing these days.
Chasing people to sign new agreement.
Amending deposit registration – removing one name and adding another.
Calculating rent amounts (as you can bet its not changed on the rent due date) – dealing with the queries from everyone about the calculations.
Circulating new deposit registration to all parties. Getting new prescribed information signed by all parties.
Getting sign off on existing inventory if its not being changed. Answering loads of questions from the ingoing tenant about what they are responsible for, for pre-existing damage.
Yes, this all takes 2 minutes to carry out.
“Given what we have to go on here the agent attempted to charge a tenant a fee of £343 for what would be about 2 minutes work on most CRM systems. A new tenancy agreement with a different name on it In anyone’s book that’s excessive”
Robert, I am somewhat shocked this is your reply, I would not have put you down to being this naïve; however, to give you the benefit of the doubt, I am assuming a dastardly culprit is doing a disservice to you by accessing your PIE account.
Thought of the day:- keep our logon credentials secret.
Sorry when i read this was a shared tenancy I assumed this was a 2 minute job replacing one tenant agreeable to the other tenants with another one, the existing tenants had found a tenant they are happy to share a joint and several tenancy with rather than stump up the rent for the remaining tenancy themselves.
It almost sound now like these tenant ought to have individual tenancy agreements
and no offence, this is the problem with assumption and is why even Landlords can think that a letting agents job is simple and takes no time. In most cases you don’t need to be brain of britain, but these things do take time especially to ensure the tenancy is still compliant. Its very common to have a shared house on one tenancy agreement, but they can be a nightmare when one of the sharers wants to leave.
Even if existing tenants find another tenant, It is still a new tenancy, so all the legal requirements where starting a new tenancy still apply, see 456Let’s list above plus providing all the documents (how to rent guide/EPC/Gas safety cert/EICR) and let’s not forget having to test the smoke/co2 alarms that must be done on the day a new tenancy starts.
Also. letting agents don’t just happen to know this stuff, we learn it, and continue to do so. I am an expert in my field, as are most Letting Agents, and yet I am expected to provide my expertise to tenants for free or at most peanuts.
Plan for the day:- eat some peanuts and bananas!
come on Rob, how long have you worked in Lettings? A recent course court on tenancy swops, ended up costing the landlord probably 10k in compensation and legal fees. its not a 2 minuet job. far from it.
This needs to be appealed and case law set. Its not about automatically drawing up a tenancy agreement using technology.
Take this scenario – which has happened:
Tenant moves in on a year long tenancy. 1 month later says they have had a change in circumstance and need to move out.
Landlord agrees to release once a new tenant has been found on the basis that they aren’t out of pocket. What are the out of pocket expenses?
Well if the property is managed, the agent will probably just charge a re-let fee which covers, marketing, updated photos (if required) viewings, negotiation, referencing, deposit registration (if included), drawing up the tenancy agreement including any special terms, arranging an inventory and check in, dealing with the utilities. Plus all the time involved in liaising between all parties setting up a new tenancy.
Yes, this is part of the job, but its a part of the job that has incurred a year earlier than would otherwise have been expected so it is a business expense that is exceptional. What I wonder in the case of Ludlow Thompson is if their legal reps presented their case correctly, or perhaps in this case it was much more simple and the costs really weren’t justified.
So as an agent, I would normally be advising the tenant that they have to pay the agents re-let fee, plus the cost of the new inventory and check in, as again, why should the landlord pay for this, again, a year earlier than they should be expecting to, just because the tenant needs to leave? Some would say, you could use the same report, but that would be very bad practice and doesn’t protect the new tenant as well.
In this case, the tenant wasn’t happy as of course its a lot of money, but they had signed a legally binding tenancy agreement that they were bound to pay rent on for another 11 months, so they accepted the charges, that were put to them prior to commencing work to release them.
So now, if costs can’t be recovered, what happens? The agent has to work for free? Or the Landlord has to foot more costs? Or the tenant is stuck in a tenancy?
I do wonder what planet our law makers are on sometimes. Can’t they see the bigger picture??