Premiums in the Private Rented Sector

Currently the legality of all ‘premiums’ paid by private rented sector tenants to letting agencies is a matter of controversy and there is confusion and misunderstanding amongst tenants and letting agents about what counts as a premium.

The Private Rented Sector (Scotland) Act 2011 will clarify the law around these charges through regulations which the Scottish Government is currently preparing.

This report aims to identify the nature of such charges in the private rented sector through a mystery shopping exercise and from the experiences of our clients.

The mystery shopping exercise showed that 26 out of the 30 letting agencies we contacted charged an upfront fee.

These charges ranged from £16.80 to £180, with eleven agencies charging £120 or more. The majority of these fees were described as ‘administration fees’, with some specifically noted as for reference checks or credit checks.

Other charges that Shelter Scotland clients have been asked to pay include fees to renew tenancies, assignation fees and continuous affordability checks.

Such pre-tenancy charges are unfair and damaging to tenants. In practice it is very difficult for tenants to avoid such charges, and in some cases they act as a barrier to taking on a tenancy which would otherwise be affordable. It makes renting more complex and so introduces mistrust between landlords, agents and tenants

A simpler and more comparable system would limit charges to, for example, rent and tenancy deposits. Services for which charges are currently being levied should be regarded as business costs which are recovered through rent if need be. So Shelter Scotland wants to see regulations clearly state that all charges made to tenants in connection with setting up a tenancy are illegal.