Letting agents ordered by Court to repay fees charged to tenants

Our Solicitor Chris McGrath takes you through recent ruling by Belfast County Court to repay fees charged to tenants.

Paul Loughran v Piney Rentals Limited and F5 Property Limited

The Belfast County Court has today ordered that F5 Property Limited, acting as a letting agent, return an administration fee which was charged to the tenant of a property before he started his tenancy.

This decision of the Court follows on from the earlier judgement of Belfast County Court in December 2017 when another letting agent, Piney Rentals Limited, was also ordered to return a similar fee which had been charged.

The judgement of the Court considers the effect of a key piece of legislation in Northern Ireland in respect of the validity of charging of letting fees to tenants, namely the Commission on the Disposal of Lands (Northern Ireland) Order 1986.

 It is anticipated that these judgements will now benefit many tenants living in or seeking to access private rented accommodation; and it is hoped that the decision may result in a change in the practices adopted by many local letting agents. 

These were joined test cases to the County Court brought in order to address a widespread practice.

Fees charged in the course of renting private rented accommodation

In both cases the tenant, Mr Paul Loughran, had rented private residential accommodation, along with others. The cases relate to separate properties, letting agents and landlords. However similar fees were sought in both instances.

The letting agent involved in the first judgement, Piney Rentals Ltd, sought payment from Mr Loughran and the other housemates of a £30.00 administration fee. This fee was required by all the tenants and was sought in advance of their occupation of the property. Similarly, as noted in today’s judgement, the letting agent F5 Property Ltd required Mr Loughran and his other housemates to pay a fee of £36.00 in addition to the required deposit and first month’s rent.

Mr Loughran subsequently believed that these were fees being levied by letting agents from tenants unfairly and most importantly, unlawfully. Mr Loughran sought the return of the fees he paid directly from both letting agents, however this was unsuccessful and proceedings were then issued before the Court.

At the time of initiating these proceedings Mr Loughran had been employed as the Vice President for Student Activities of the Students Union in Queens University Belfast. Mr Loughran was very aware of the genuine and regular difficulties that these additional charges created for prospective tenants seeking to access suitable private rented accommodation, particularly impacting the most vulnerable within society.

Unlawfully obtained fees

In addition to the belief that these fees charged by letting agents were unfair and unjustifiable, it was the key argument of the tenant that the fees charged in both instances were unlawfully obtained.

The tenant argued that he was entitled to recover the monies charged as they were contrary to the provisions within the Commission on the Disposals of Land (Northern Ireland) Order 1986 (1986 Order).

It was the tenant’s position that the existing legislation within Northern Ireland was such that these fees could be found to be illegal and therefore recoverable. The tenant argued that it was unlawful for a letting agent to levy a fee on a tenant or prospective tenant that is in addition to rental charges and a deposit.

The court surmised in each case that for the tenant to succeed in his case against the letting agents, that he would be required to satisfy the court that what occurred in his dealings with each letting agent came within the reach of Article (3) )1) of the 1986 Order which stipulates:

“3 (1) Where, on the disposal of land, an agent acting for the person making the disposal is entitled to be paid a commission, any stipulation made on the disposal to the effect that person acquiring the land shall pay the whole or any part of the commission shall be void.”

Findings of the court

It is submitted that the Court in its judgement of today and its earlier decision in December 2017 has provided authority in relation of the definition of ‘commission’ for the purpose of the 1986 Order, and provides guidance to what appears to be the limited circumstances in which an agent may impose fees on tenants.

In both cases the Court found that there was an obligation on the tenant to pay the fees sought by the letting agents. The fees sought by the letting agents were imposed and a precondition of the tenancy, they were in essence non-negotiable. This finding was significant as an obligation to pay is an essential element of the provisions of the 1986 Order.

Additionally the Court then considered the purpose of the fee. The Court considered whether the tenant was in fact paying for work that the letting agents were carrying out for the Landlord in letting the property.

In both cases the Court found that the payment of the fee levied by the letting agent was in fact a contribution towards the costs of the services that the agents had been commissioned by the Landlord to do.

In essence the Court found that the 1986 Order allows tenants to recover monies they have paid towards the remuneration of letting agent for work that the letting agent has in fact done for the Landlord in the letting of a property.

In both instances the Court found that the fees charged to the Tenant were void under the provisions of the 1986 Order and that the Tenant is entitled to have the fees returned to him.

In summary 

On review of the detailed and comprehensive Judgements provided by District Judge Gilpin in these matters it is now submitted there is a general rule that when a letting agent is instructed by a Landlord to let a property, then they are acting for the Landlord and not the tenant or prospective tenant.

It follows that it is also submitted that the effect of the 1986 Order is that as a general rule and in most instances, no fee can be levied by a letting agent on a tenant or prospective tenant in respect of the letting of a property.   

It is the position of Housing Rights that these judgments establish an authority that many, probably most, fees charged to tenants by letting agents during the course of letting the property are unlawful.

It is the experience of Housing Rights when dealing with clients, that the charging of upfront fees to prospective tenants remains a common practice, and these fees can be up to £100.00. The existence of these fees has undoubtedly represented a significant barrier to access affordable housing, which has a disproportionate impact on low income households and the student body.

In advancing these cases before the Court it has been submitted that the 1986 Order was specifically drafted with the intention of preventing these types of administrative charges being sought by letting agents from tenants. It is hoped that this judgement will go some way to addressing this unhealthy practice and re-establishing the position of existing legislation in preventing the charging of such fees.

Seek advice

This case identifies that in certain circumstances, those tenants with evidence that they have paid letting or associated fees in the last six years could seek to have the charges refunded. Whilst this obviously strengthens the hand of some tenants seeking redress, it does not follow that in all circumstances there will be an automatic entitlement to a refund. It remains important therefore that anyone who may have been impacted seeks advice. You can call our housing helpline on 028 9024 5640.