The Property Chamber of the First-tier Tribunal has ruled against a letting agency in a landmark Tenant Fees Act case, putting the rest of the sector on notice.
London-based letting agency Ludlow Thompson had claimed £343 from a house-share tenant’s deposit after he moved out (to cover the costs of creating a replacement tenancy). However, the tenant claimed that this was an illegal fee under the Tenant Fees Act 2019.
The Act gives agents the automatic right to charge up to £50 for altering or replacing a tenancy, but says they can also charge “reasonably incurred costs” if higher. While Ludlow Thompson had given the tenant an itemised list of costs, including re-registering deposits and generating a new tenancy agreement, the tribunal ruled that all of them fell within the ordinary duties of a letting agent, so the cap of £50 still applied. To justify charging more, it said, the costs incurred would need to be “out of the ordinary run of similar transactions”.
Charging novation fees (fees for replacing a contract, such as a tenancy) is fairly common in the private rented sector. Indeed, Ludlow Thompson had previously been referred to its redress scheme by tenants in similar cases. Those fees may now need to stop. In the wake of the case, lettings industry body Propertymark advised members to charge no more than £50.
Property law experts warn that capping novation fees could have a chilling effect on the private rented sector. Renters have no automatic right to have their tenancies changed or reassigned – they need the landlord’s agreement. If letting agents have to start recovering costs from landlords instead of tenants, landlords may simply stop agreeing to tenancy reassignments.
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