A leading property lawyer is warning that a tribunal case between a London letting agent and a tenant - involving a charge of £343.54p - has put the industry in a dilemma.
The Ludlow Thompson agency has been ordered to return the £343 to a tenant because it could not prove that the cost of moving in a replacement tenant to a property in Hackney was in any way exceptional.
The First Tier Property Tribunal heard that the agency took the £393 from the tenant to cover the provision of a new tenancy agreement naming the new tenant.
The tenant claimed it was a prohibited payment under the Tenant Fees Act, which caps such unexceptional charges at £50, and in a landmark ruling the tribunal agreed.
The tribunal ruling says: “At no point has it made a case for this transaction being anything other than an ordinary, run of the mill example of tenant churn in shared rented housing.”
It also says that “a landlord or letting must be able to point to something that makes the charge at least somewhat out of the ordinary run of similar transactions” to justify a charge above £50.
Now leading property lawyer David Smith, a partner at JMW Solicitors, says: “This will be a problem for many agents who charge their actual costs for these changes, which are usually over £50. The other problem will be for tenants.
“There is no obligation on a landlord to agree to a change of tenants and if agents are going to be limited to a fee of £50 they may look to recover the additional expense from landlords who may then simply refuse to agree to a change of tenants.
“I doubt that Ludlows will appeal but I think they should. The tribunal seems to me to be completely off base on this decision. This case will undoubtedly cause difficulties for agents until it is appealed to the Upper Tribunal and a binding decision is obtained.”
According to the Tenant Fees Act 2019, a fee can be charged where a tenant wants to leave early and replace themselves with an alternative tenant.
However, the fee chargeable is limited to be either £50 or “the reasonable costs of the person to whom the payment is to be made in respect of the variation, assignment or novation of the tenancy”.