Unlawful fees

Sometimes landlords or letting agents charge prospective or current tenants fees for services. This page explains what fees are unlawful are and what action tenants can take if they've paid such a fee.

This content applies to Scotland

Overview

It is lawful to ask a tenant 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. Most deposits must now be placed into a statutory scheme. See the section on deposits for more information.

However, some landlords or letting agents also ask for a sum of money for granting or renewing a tenancy. This payment can be called a 'premium', 'key money', a 'holding deposit', or could be a charge for a credit check or 'admin fees'.

Under the Rent (Scotland) Act 1984 and the Housing (Scotland) Act 1988 it's unlawful for landlords or letting agents to charge a 'premium' for the granting or renewal of an assured, short assured, or private residential tenancy. 'Premium' is defined as 'any fine, sum or consideration, other than the rent, and includes any service or administration fee or charge'. [1]

Landlords and letting agents are also obliged to provide written tenancy agreements for assured tenancies or private residential tenancies for free, [2] and the Accommodation Agencies Act 1953 makes it unlawful for an agency to ask for money for registering a client or for providing them with a list of properties. [3] It's important to note that these fees are not 'premiums', however, they can still be claimed back.

Anyone found guilty of charging a premium or asking for money for providing a prospective tenant with a list of properties is liable to a fine of up to £1,000 (level three on the standard scale). [4]

Where a fee is charged but no tenancy begins

It should be noted that the protection of the 1984 Act only applies where the property has been let. In situations where a landlord charges a holding deposit but the tenancy, for whatever reason, does not begin, the route to recover this money is likely to be via the simple procedure.

When applying to under the Simple Procedure in these cases: [5]

  • State that they are seeking money paid in expectation of a lease which never began.

  • State on the application form that 'as no tenancy began, the First Tier Tribunal have no jurisdiction in this matter'

  • Give full details of what happened , including copies of any paperwork, relevant dates and evidence of any payments

It may be useful also to remind the client that there is a right to appeal decisions made under Simple Procedure however there is a strict 28 day time limit. A client wishing to appeal a decision should be referred to a solicitor with experience in housing law.

If the money is taken by a letting agency ahead of a tenancy beginning this may be in breach of the Accommodation Agencies Act 1953 and the Letting Agency Code of Practice. Where a letting agent breaches the code of practice the First Tier Tribunal may be able to award compensation.

Claiming back an unlawful tenancy fee

Tenants who have been charged an unlawful fee should write to their landlord or letting agent to ask for the money back. In this letter they should explain that the law expressly makes such charges unlawful. The letter should be sent via recorded delivery and a copy kept.

If the tenant has a short-assured tenancy, caution should be used, and it is probably best to start this process after the tenancy has come to end. Landlords may decide not to renew a short assured tenancy if they have had to refund a premium to a tenant.

Recovering fees from a letting agent

Where a fee has been charged by a letting agent (on or after 31st January 2018) it should be noted that this is likely to be in breach of the Letting Agent Code of Practice. Under the Code all letting agents must comply with all relevant legislation, [6] which includes s.82 Rent (Scotland) Act 1984 prohibiting the charging of illegal premiums, and the Accommodation Agencies Act 1953 which prohibits taking money in consideration of or undertaking to register a client or provide them with a list of properties. Also, letting agents must not, as a condition of granting the tenancy, require tenants to use a third party service that charges them a fee. [7]

A tenant who has been charged an unlawful fee by a letting agent may be able to raise an action at the First Tier Tribunal Housing and Property Chamber on the basis that the agent is in breach of the Code of Practice and may also be entitled to claim compensation. See the section - Letting agent not complying with the Code for more information. This may apply even if the tenancy did not begin.

Recovering fees from a landlord

Where a landlord has charged an unlawful fee the tenant can raise a civil action at the First Tier Tribunal Housing and Property Chamber.

The application should be made under rule 87 [8] and the applicant may find it helpful to state that they are seeking to recover a fee which has been taken from them in breach of ss.82-90 Rent (Scotland) Act 1984.

The tenant will be required to provide evidence of any sums paid along with their name and address, the landlord name and address and landlord registration number (if known). They should, if possible, provide proof of the tenancy.

The application is made using Form G-Other Private Tenancy Applications which is available (along with guidance notes) from the tribunal website

Withholding rent up to the value of the fee

Tenants could withhold rent up to the amount of the unlawful fee. However, this is a particularly risky strategy and if withholding rent, the tenant should write to their landlord explaining that rent is being withheld, stating the reasons why. This amount should be deposited in a separate savings account by the tenant and clearly marked as a rent account.

Make a complaint to the local authority

The charging of premiums can also be reported to the local authority's private rented housing department, who are in charge of administering landlord registration. Based on this information the local authority can investigate whether the landlord or their agent is a 'fit and proper person' to be renting out accommodation, and potentially remove them from the register of landlords or letting agents register. See the section on landlord registration or letting agent registration for more information.

Make a complaint to the police

Technically, as both the Rent (Scotland) Act 1984 and the Accommodation Agencies Act 1953 confer criminal liability, tenants can also report the matter to the police. However, it may be difficult to persuade the police that this is a criminal matter, as housing issues are often seen as civil matters. When making a complaint to the police it's important to draw their attention to the relevant sections of the Rent (Scotland) Act 1984, the Housing (Scotland) Act 1988 or the Accommodation Agencies Act 1953 [9] (depending on which crime you want to report).

Last updated: 21 October 2019

Footnotes

  • [1]

    ss.82-90 Rent (Scotland) Act 1984; s.27 Housing (Scotland) Act 1988 as amended by s.32(3) of the Private Rented Housing (Scotland) Act 2011

  • [2]

    s.30(3) Housing (Scotland) Act 1988; s.10 Private Housing (Tenancies) (Scotland) Act 2016

  • [3]

    s.1(1)(a) and (b) Accommodation Agencies Act 1953

  • [4]

    s.82(3) Rent (Scotland) Act 1984 and s.1(5) Accommodation Agencies Act 1953

  • [5]

    s.1(1) Rent (Scotland) Act 1984, property must be 'let' as a dwellinghouse. See also First Tier Tribunal decision Natasha Rasool v Marty Donnelly FTS/HPC/PR/19/2875

  • [6]

    sch.1 para.1 (16) Letting Agent Code of Practice (Scotland) Regulations 2016 SSI 2016/133

  • [7]

    sch.1 para.1 (49) Letting Agent Code of Practice (Scotland) Regulations 2016 SSI 2016/133

  • [8]

    sch.1 para.87 First-tier Tribunal for Scotland Housing and Property Chamber (Procedure) Regulations 2017 SSI 2017/328

  • [9]

    ss.82-90 Rent (Scotland) Act 1984; s.27 Housing (Scotland) Act 1988 and s.1(5) Accommodation Agencies Act 1953