Breaking the letting fees ban - what we know

Jun 15, 2021 4:23 PM

Holding deposits are the most common type of payment that landlords and letting agents break the rules on. 

Two years ago, the Tenant Fees Act came into force in England, making it illegal to charge renters much more than rent, holding deposit and security deposit. If you are charged an illegal fee, one way of getting it back is through the First-tier Tribunal (Property Chamber), and all its decisions are published online. We have taken a look to see what we can learn.

There have been just 17 Tribunal cases up to May 2021, but they do give us an idea of what the common offences are and what happens when renters challenge them.

Holding deposits

Eleven of the disputes involved a holding deposit, which are taken to reserve a property before the tenancy is agreed, are refundable as long as the tenant acts reasonably and can be a maximum of one week's rent.

In most cases heard by the Tribunal the tenancy did not proceed. In three the landlord or agent had not taken reasonable steps to agree the tenancy - through poor communication, or trying to let a home that was already occupied.

In five cases the landlord or agent failed to notify the tenant that they would withhold the holding deposit, meaning they had to return the full amount. Five cases saw the tenant overcharged, and they got at least some of the money back - but the landlord can keep some when they otherwise tick the right boxes.

In one case, the tenant was overcharged but was found not to have taken reasonable steps to agree the tenancy - disputing the rent agreed when they paid the holding deposit. Because the landlord had notified the tenant that he would withhold the holding deposit, he was awarded his costs, but the tenant was awarded the cash they had been overcharged for.

In a case where the Tribunal didn’t rule in favour of the tenant, they tested the reasonableness of the landlord’s behaviour. There was no evidence that he acted aggressively (which would have been grounds to get the holding deposit back). “Blunt” behaviour was deemed acceptable, and did not affect the outcome of this case - the tenant had made a request (for improved broadband), after putting down the holding deposit. The landlord could not agree to this so the tenant pulled out.

Security deposits

Five of the cases involved security deposits which can be up to five weeks' rent, are refundable, and must be protected for the duration of the tenancy. Tenants who paid a deposit of more than five weeks' rent before the Tenant Fees Act came into force can claim back the difference and one tenant did this successfully at Tribunal. 

However, three cases were not within the remit of the Tribunal. Disputes around deductions from the security deposit have to go through the deposit protection scheme, while claims for non-protection of the deposit go through the county courts. 

That said, one case involved the failure to return part of the security deposit which was claimed to cover cleaning costs – it was only accepted by the Tribunal by chance because the Deposit Protection Service had been unable to make a decision after a crucial email went into junk and wasn’t discovered until after the deadline for response. In that case the landlord paid £336 for professional cleaning but could not charge anything to the tenants as they had already cleaned to an acceptable standard when they moved out.

Permitted fees

One case included the charging of an unreasonable fee to change a name on the tenancy. The letting agent was permitted to charge £50 or more if they could prove their reasonable costs. The Tribunal estimated a reasonable time of an hour to carry this out, saving the tenant £150 that they were overcharged.

Prohibited fees

None of the cases involved the agent or landlord trying to charge a fee that was explicitly banned by the Act e.g. admin, inventory, referencing or renewal. That said, the Tribunal is just one way renters can get their money back. Trading Standards also have powers to take action against offenders, while some cases may not end up going to court because the agent agrees to refund a payment when they are caught out. In other cases, tenants may take no action, recognising the leverage they have if the landlord ever serves a no-fault eviction notice. But it is also likely that a lot of renters are getting ripped off and don’t know their rights. There may also be some scams that are less clear-cut so are harder to challenge at Tribunal - tell us of any rip-offs you have encountered here.

The positive news from these findings is that the success rate should give renters confidence that they can win their money back - especially as it is free to make an application to the Tribunal. These cases give renters an idea of what tactics some agents and landlords are still using to unfairly take and keep their money. While it is welcome that tenants won their money back in most cases, these scams shouldn’t be happening in the first place. Tenants can only win back the money they originally paid and get nothing for the inconvenience of chasing reimbursement and putting together their case.

It's also worrying that in most cases, the landlord is the offender. Letting agents must be part of a redress scheme and this may be keeping bad behaviour in check. But it is clear landlords need to be subject to this system too. The case for a national register of landlords is clear – and the government must do more to raise awareness of tenants’ rights.

Our tips for exercising your rights under the Tenant Fees Act

  • Make sure you get the landlord’s address, or check the letting agent is registered with a redress scheme, and be clear about your requirements and the agreed rent, before handing over the holding deposit.
  • If the tenancy falls through and you did everything that was reasonably asked of you, you should be entitled to all your money back. If you don’t and the landlord doesn’t have a good reason, apply to the Tribunal or contact your council to try to recover it. Also consider complaining to the agent as you could be awarded compensation for them wasting your time – the redress scheme would make the final decision.
  • As long as you return your home to the condition you found it in, the landlord should not charge you for cleaning costs. If you want a pet they may have grounds to deduct professional cleaning costs from your deposit at the end of the tenancy – research the costs of this to help with your negotiation.
  • Get everything in writing and keep correspondence with your landlord or letting agent in one place in case you ever need to raise a dispute.
  • There are different places that deal with different types of dispute: deposit protection schemes deal with unfair deductions, the tribunal deals with illegal fees, and county courts deal with unprotected deposits. It’s no wonder the rental market can get confusing - to find out more about your rights sign up for an online event during Renters Rights Awareness Week