EXPERT: Why are so many agents and landlords ignoring fees law?

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The Tenant Fees Act has been in place for nearly four years but is it shocking how many property professionals, also known as letting agents, are either not aware of its existence, or believe they can charge a fee as long as they call it something else.

I have looked at the 34 most recent cases heard by First Tier Tribunals relating to Tenant Fees Act and any financial penalties awarded.

Shockingly of these cases only ten were brought against landlords who were self-managing, the rest were all against letting agents, a number of which where high street national agents which, in my opinion should have known better.

The most common complaints raised by tenants were:

• Refusing to refund holding deposits 58.8%
• Early termination fees 14.7%
• Security deposit over 5 weeks 8.8%

For this last category all three were brought against self-managing landlords.

And in all but four of these cases, the Tribunal found in favour of the tenant and ordered the agent/landlord to refund them in part or full.

The tribunal awarded the return of over £11,500 of prohibited fees to tenants or £385 per case on average.

More worryingly many of the agents who defended their cases claimed the holding deposit was ‘a reservation cost’ or ‘advanced rent’.

It’s clear that several well-known agencies have recently tried to disguise a prohibited fee by claiming that an Assured Shorthold Tenancy has not been created and therefore the Tenant Fees Act doesn’t apply.

What is seriously concerning is the fact that landlords who are clearly taking heed of ‘unconscious incompetence’ and putting their trust in letting agents to manage their asset within the law are being let down at the very first (and can I say) rather basic hurdle.

If property professionals aren’t aware of the regulations how can the negative reputation surrounding the private rented sector ever improve?

Here’s my guide for both landlords and agents

What is a holding deposit?

A holding deposit is a payment made to a landlord or letting agent to reserve a property.

The holding deposit cannot be more than 1 weeks’ worth of rent and the property must be removed from the market.

Since the introduction of the Tenant Fees Act there are now have some strict rules that need to be followed when taking a holding deposit.

I will just point out that a holding deposit is not a legal requirement and doesn’t have to be taken, but if one is taken then the following must be done correctly.

Only one holding deposit can be taken for a property

It is not uncommon for some landlords and agents to take more than one holding deposit and then simply refund those who don’t pass referencing or fail to refund anyone in one of the cases at the Tribunal.

Receipt and Holding Deposit information

When a holding deposit it taken, it is a legal requirement to provide the tenant with a receipt for the funds as well as a document that sets out what the holding deposit it for, how long it will be held and the clear reasons for refund and for withholding it.

Failure to provide this to the applicant could mean you are subject to a find or having to refund the monies.

Provide a copy of the tenancy agreement

A draft copy of the tenancy agreement must also be given to the applicant when the holding deposit is take, this document can have water marks to show it is a draft, but it must contain the terms of the tenancy that the tenant will be expected to enter into

14 days to enter into a tenancy

Under the Tenant Fees Act, you have 14 days to enter into a tenancy agreement from the date the holding deposit is paid, if this is not possible, may be due to referencing not coming back in time, then the agent or landlord would need to sign and agreement to extent the time. If this is not done then the holding deposit must be returned in full on day 15.

When can a holding deposit be withheld?

Failed referencing

It is not uncommon for applicants to fail referencing, but this is not automatically a reason to withhold the holding deposit.

Only if applicants have provided false or misleading information that would have made you move forward with he let would give you reason to possibly withhold if they failed referencing.

Not entering into a tenancy

If the tenant fails to take reasonable steps to enter into the tenancy, then the agent or landlord could retain the holding deposit, but if it is the agent or landlord who is dragging their feet then the holding deposit should be returned if the tenant pulls out of the let.

If either party changes their mind

If the applicant changes their mind before the let is agreed, then the landlord or agent can usually retain the holding deposit, as long as the agent or landlord have not done something to force the tenant to change their mind.

Also, if the landlord changes their mind, then the holding deposit would need to be refunded as long as the reason for the change was not a deliberate act to mislead by the applicant.

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