Letting and accommodation agency fees

Once a client has signed a contract to accept the tenancy of a property, a letting agency may ask the client to pay up to two months' rent as a security deposit against, for example, damage to property, unpaid fuel or telephone bills, cleaning bills, or removal of furniture by tenants without permission. For more information, please see the page on deposits.

However, it is illegal for an accommodation agency to ask a prospective tenant for a deposit which they say will be non-returnable if the agency does not find a suitable tenancy for that person.

Under the Accommodation Agencies Act 1953, it is an offence for a letting or accommodation agency to charge, or accept payment from, a prospective tenant for:-

• registering with the agency (this would include 'deposits' which are said to be non-refundable if the agency does not find a suitable tenancy for the prospective tenant), or

• providing details of properties they have to let. [1]

To charge, or accept payment, for these things is an offence no matter what type of tenancy the prospective tenant is seeking.

If a letting agency asks for a deposit that the agency says will be returnable if it does not find the client a property, but they do not return the money, this is likely to be unlawful and the tenant may wish to report this matter to the police. In addition this will almost certainly be in breach of the Letting Agent Code of Practice. A tenant seeking return of the money paid can apply to the First Tier Tribunal Housing and Property Chamber. See the section on Letting agent not complying with the Code for more information.  

Sometimes, additional payments sought by letting or accommodation agencies in relation to granting or renewing a tenancy are called 'premiums', 'key money', or a 'holding deposit'. The accommodation agency may say they are charging the amount to cover 'credit checks' or 'admin fees'. These fees are illegal in relation to almost all private tenancies. [2]

Again, this is also likely to a breach of the Letting Agent Code of Practice. A tenant seeking return of money paid can apply to the First Tier Tribunal Housing and Property Chamber. See the section on Letting agent not complying with the Code for details.

It is clear from the Accommodation Agencies Act 1953 and the Rent (Scotland) Act 1984 that it is an offence to ask for certain payments in relation to prospective tenants and, in the case of premiums, in relation to the renewal of a tenancy.

This is distinct from an accommodation agency asking an existing tenant to cover some administrative costs during a tenancy. For example, payments related to issuing a new inventory or arranging duplicate copies of a lease during a tenancy. While this is not an offence per se, the agency has no legal right to ask for such a payment. It is also worth bearing in mind that the agency will recover a fee from the landlord for handling the tenancy in the first place. So it may be worth reminding the agency of that, and suggesting that any administration fees should be met that way instead.  It does appear to be legal for letting agents or accommodation agencies to request a charge for providing a former tenant with a reference at the end of a tenancy.

It is prudent for advisers to inform clients of such possible additional costs and to be clear about whether the agency are committing an offence, or whether they are asking for additional payments which they have no legal right to ask for. There can be some confusion here so, for clarity, clients should ask prospective landlords for a breakdown of any additional costs and why they charge them. Prospective tenants can then weigh up whether they wish to pay the additional costs and choose to use the agency.

Letting agencies are obliged to comply with the Letting Agent Code of Practice and so if there is any doubt about what is being charged tenants should check to see whether this amounts to a breach of the Code.  

If still dissatisfied, or if they're unsure whether the fees charged are legal, tenants can also report the matter to the local authority department in charge of administering letting agent registration.