You may or may not remember that the 2015 Consumer Rights Act imposes an obligation on letting agents to display details of their fees in their offices and on their websites. I wrote about this here.
Under s83(4) the act states that this must include
(a) a description of each fee that is sufficient to enable a person who is liable to pay it to understand the service or cost that is covered by the fee or the purpose for which it is imposed (as the case may be),
(b) in the case of a fee which tenants are liable to pay, an indication of whether the fee relates to each dwelling-house or each tenant under a tenancy of the dwelling-house; and
(c) the amount of each fee inclusive of any applicable tax or, where the amount of a fee cannot reasonably be determined in advance, a description of how that fee is calculated.
Guidance issued by the DGLC when the act was still a bill said:
Ill-defined terms such as administration cost must not be used.
Enforcement is via trading standard offices (‘the local weights and measures authority”) who are empowered to fine erring agents under a penalty notice after service of a ‘notice of intent’. Assuming the offending wording is not changed.
Foxtons. Again.
However notwithstanding this, Foxtons published a fee of £420 on their website which was described as, yes you’ve guessed it, an ‘Administration Fee’.
It always seems to be Foxtons who are the butt of these claims – old Landlord Law Blog lags will remember the claim brought against them by the OFT in 2010. In fact the Foxtons litigation has been very helpful in developing areas of landlord & tenant related law. A couple of other claims have been threatened but don’t seem to have got anywhere but this one will now be a useful authority.
London Borough of Camden v Foxtons Limited: [2017]
The facts
The London Borough of Camden (Camden) – one of the few Councils to actively pursue letting agents and seek to enforce the legislation (and good for them for doing it) were unhappy with Foxtons description of their fees as an ‘Administration Fee’ and proceeded to fine them.
Foxtons believed that they had dealt with Camden’s objections by adding an explanatory paragraph, viz
Administration fee: £420 per tenancy.
This is a fixed cost fee that can cover a variety of works depending on the individual circumstances of each tenancy, including but not limited to conducting viewings, negotiating the tenancy, verifying references and drawing up contracts.
This charge is applicable per tenancy, and not per individual tenant.
Camden were unhappy with this though and the case went to the First Tier Tribunal, who accepted the explanatory paragraph and reduced the fine to take account of Foxton’s later compliance.
However Camden were not prepared to accept this and so the matter was referred to the snappily named Upper Tribunal Administrative Appeals Chamber where it came before Judge Levenson on 25 August 2017. You will find the report here.
The Upper Tribunal Decision
The description of the admin charge, decided the Judge was inherently unclear. If the Foxtons wording had said that the administration charge would never exceed £420, that would have been all right. But it didn’t. To quote the Judge:
It is the use of the phrase “can cover” that bothers me. It encompasses the idea of “might not cover” and therefore the wording is not clear that there will be no services (not listed under “Other fees”) which incur or might incur a further charge.
The failure of the First Tier Tribunal to realise this implication amounted (said the Judge) to an error of law entitling him to set aside their decision and impose his own.
The Judge’s decision concerned the amount of the penalty. Giving them a slight credit for trying to resolve the problem (despite the fact that their suggested resolution proved ultimately unacceptable) the penalty was amended to £18,000.
Commentary
If you are a letting agent make sure that any description of your fees is comprehensive and complete – and do not include any ‘vague element’.
This decision will be very useful for other Trading Standards Offices. You will find the online report here.
Ben Reeve-Lewis says
October 5, 2017 at 10:39 AMWith a couple of exceptions, certainly Camden, I find council trading standards officers appallingly lax at using their powers with dodgy agents and dodgy agents represent an increasing number of fraud, illegal evictions and shady practices, probably more so than individual landlords in London at the moment.
They are quite arrogant and feel invulnerable and why not given how its trading standards teams who have the powers (not housing) but they dont exercise them for the most part.
Steve Infield says
October 10, 2017 at 9:33 AMIt’s not just with agents that they are lax. They let rogue landlords get away with appalling ‘standards’. It’s utterly shameful.
Peter Jackson says
October 5, 2017 at 2:16 PMAs a landlord I consider that all the specific actions named would be something that I am paying for. Most seriously when a letting agent negotiates a tenancy he is acting on my behalf so he should not be taking money from the other side for the same thing. It seems a clear conflct of interest to me.
Additional fees where the tenants cicumstances cause extra work make sense. For example my main letting agent adds “An additional charge of £30 inclusive of VAT and an additional credit search fee of £3.48 inclusive of VAT is payable should a guarantor be required” which seems perfectly fair to me.
Ben Reeve-Lewis says
October 5, 2017 at 2:26 PMBut thats the point with the Foxton’s case Peter. Your agent sets out what the admin fees are for, Foxtons didnt
Peter Jackson says
October 5, 2017 at 9:08 PMYes, but you missed my point.
Foxton’s should not have been charging the tenant at all for the things they mention. When doing that work they are acting as the landlord’s agent, not on behalf of the tenant. Taking money from the tenant for that work creates a conflict of interest.
Such fees should be banned, though there are cases of fees that should be allowed, such as the example I gave.
Tessa Shepperson says
October 5, 2017 at 9:43 PMAbsolutely. Thats what I have been saying. Tenant fees is a conflict of interest. After all, solicitors are not allowed to act for both sides in a conveyance.
Kate Pearson says
October 16, 2017 at 10:42 PMAgents charge landlords a fee for a service and they shouldn’t be charging tenants for the same service, pretty obvious really. I do believe agents should be able to charge tenants for credit referencing and guarantor referencing and the like and the fee should reflect their costs, but that’s it. It’s worse when there is a lack of rental properties as agents have tenants between a rock and a hard place, they can’t just go elsewhere.
At the moment the agent system is broken. Agents have to win business by wooing landlords – not tenants. Landlords will be attracted to the cheapest option for them and have no incentive to shop around for the agent providing the best fee structure for their tenants, they may not even know what their agent charges their applicants. This needs to change clearly. There is some real profiteering going on at the moment in areas of high demand.
Government and councils just keep introducing new regulations, but there is no enforcement as such of the regulations that already exist. Agents who are acting fraudulently are doing so with no fear of repercussions. They fail to protect deposits, trade well into insolvency and sometimes much worse and walk away without a scratch in most cases, then set up under a slightly different name, often in the same premises next day. Sinking everyone’s money into the abyss. The lack of prosecution attracts criminals into the industry and hurts tenants and landlords alike and reflects so badly on those agents out there who act professionally and ethically.