A First-tier Tribunal has ordered a letting agency to hand back thousands of pounds to tenants in a recent Tenant Fees Act ruling.
London letting agency Winkworth Shoreditch signed a two-year Assured Shorthold Tenancy (AST) with two tenants, and included a break clause at 12 months. But after four months, the tenants requested an early termination, which the agents and the landlord agreed to on condition that the tenants followed their early termination process.
The AST that the tenants had signed included a clause saying that if they left early and the new tenants paid less in rent, they would have to compensate the landlord for the loss. Under the Tenant Fees Act, agents are also allowed to charge early-exiting tenants for the resulting marketing, referencing and administrative costs of finding replacement tenants.
In the event, the new tenants agreed a rent of £200pcm less. Winkworth Shoreditch charged the exiting tenants £1,802.60 for lost letting fees and £1,325.02 for lost rent, plus admin and referencing fees of £375 (which were not disputed). The tenants paid up, but also applied to the First-tier Tribunal for recovery of a prohibited payment under the Tenant Fees Act.
The decision
In their case to the tribunal, the tenants requested the return of part of the lost letting fees. They argued that the agency could charge reasonable costs of reletting the property based on actual services rendered, but not their full commission-based fee, and requested a partial repayment.
After hearing the arguments, the judge ruled that the lettings fees of £1,802.60 could have been paid by the incoming tenants and were therefore a “double recovery” and a prohibited fee.
On top of that, he ruled that the tenants didn’t have to cover the difference in rent as the landlord is obliged to mitigate his losses – and pointed out that if the agency had achieved a higher rent, they wouldn’t have offered to pay the difference to the former tenants.
He therefore ordered Winkworth Shoreditch to repay £2,252.06 to the tenants within 21 days, covering the full value of the lost rent as well as part of the agency fees.
The consequences
Winkworth Shoreditch could apply to appeal the decision to the Upper Tribunal given that the tribunal case said it was “doing the best it can on the information provided by the parties”.
The decision is a shot across the bows of any agency that breaches the Tenant Fees Act by charging early-exiting tenants for lost rent and fees. In the wake of the decision, Winkworth Shoreditch said that it would warn its landlords about the risks of early exits.
It may also put pressure on letting agents not to agree to early contract termination requests from tenants. Instead, more tenants could find themselves being held to their full contractual rent for their full term.
Other letting agency headlines
Agents fear for future of Private Rental Sector – RICS – Letting Agent Today
Open letter calls on new government to regulate property agents – Property Industry Eye
Dishonest estate agent loses appeal against RICS expulsion – The Negotiator
