Watch out for ‘secret’ compliance fee clauses in contracts, landlords warned

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A leading housing lawyer has questioned the use of property regulation compliance fees which appear to absolve letting agents of their responsibilities to ensure a landlord’s property is being managed lawfully.

Tessa Shepperson, a solicitor who runs Landlord Law, says one landlord was charged a compliance fee on top of his 12% commission fee and discovered a clause buried in his agency agreement which says: “In consideration of the Landlord paying the Compliance Fee the Agent will indemnify the Landlord for a fine or penalty that arises from the Agent’s failure to ensure compliance with the Landlord’s statutory responsibilities.”

This clause goes on to list a number of conditions, including “getting any necessary permission to let and any HMO or other licenses”.

It adds that “A Compliance Fee Indemnity will not be provided where a liability arises when the Tenant has been in any way obstructive.”

Compliance fee

Shepperson questions whether, if the compliance fee is not paid, the landlord wouldn’t have redress if the agent ignored all relevant legislation and let the landlord in for substantial fines and penalties.

She says: “If the agent took a deposit from the tenant and failed to protect it within the 30-day period, could the agent use the landlord’s non-payment of a compliance fee to defend any claim that the landlord might make against the agent if they are sued by the tenant for the penalty?”

As he owns the property in his name, this landlord – unlike those who put their property into a limited company – could claim protection under the Consumer Rights Act.

She tells LandlordZONE: “Landlords need to read their agency agreement and challenge such a claim, and maybe avoid those agents who use them altogether.”

Small print

Propertymark says compliance is legally required, and all agents have a fiduciary duty to their client, so that if a fee is being charged for this, an agency shouldn’t hide it in the small print of their agreement, president Greg Tsuman (pictured) tells LandlordZONE.

He adds: “Agencies’ models and how their fees are charged vary, however, all fees need to be transparent as it’s important for a landlord to be able to make an informed decision on what services they’re offered and the fees included.”

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