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Court orders letting agents to repay fees charged to tenants

Belfast county court recently ordered letting agents to repay fees charged to tenants. These judgments will benefit tenants living in or hoping to access private rented accommodation.

    29 June 2018

    Paul Loughran v Piney Rentals Limited and F5 Property Limited

    The Belfast county court ordered F5 Property Limited to return an administration fee charged to a tenant before his tenancy began.

    This court decision follows the Belfast county court judgment in December 2017 when another letting agent, Piney Rentals Limited, was also ordered to return a similar fee.

    The court judgment considers the effect of a key piece of legislation in Northern Ireland. The Commission on the Disposal of Lands (Northern Ireland) Order 1986 (1986 order) deals with the validity of charging letting fees to tenants.

    These judgments will benefit tenants living in or hoping to access private rented accommodation. The decision may result in a change in local letting agents' practices. These were joint test cases brought to the county court 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 judgment, Piney Rentals Ltd, asked Mr Loughran and his housemates to pay a £30.00 administration fee. The judgment notes that F5 Property Ltd also required Mr Loughran and his housemates to pay a fee of £36.00. This was in addition to the required deposit and first month’s rent.

    Mr Loughran believed these fees were being unfairly and unlawfully charged. Mr Loughran asked both letting agents to return the fees he paid. The agents refused and proceedings were then issued before the court.

    At the time of initiating proceedings, Mr Loughran was employed as the Vice President for Student Activities of the Students Union at Queens University Belfast. He was aware of the genuine and regular difficulties these extra charges created for prospective tenants.

    Unlawfully obtained fees

    In addition to believing that these fees were unfair and unjustifiable, the tenant argued that the fees charged in both instances were unlawfully obtained.

    Mr Loughran argued that he was entitled to recover the monies charged. He stated they were contrary to the provisions within the 1986 order. The tenant stated that the existing legislation in Northern Ireland was such that these fees could be found to be illegal and therefore recoverable. He argued that it was unlawful for a letting agent to levy a fee in addition to rental charges and a deposit.

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

    “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

    In this judgment, and its decision in December 2017, the court provided authority on the definition of ‘commission’ for the purpose of the 1986 order. It also provides guidance to the limited circumstances in which an agent may impose fees on tenants.

    In both cases, the court found there was an obligation on the tenant to pay the fees. The fees were imposed as 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 1986 order provisions.

    The court then considered the purpose of the fees. It considered whether the tenant was in fact paying for work that the letting agents carried out for the landlord in letting the property. In both cases, the court found that the fee was in fact a contribution towards the costs of the services that the landlord hired the agents to do.

    The court found that the 1986 order allows tenants to recover monies paid towards the remuneration of the letting agent for work that they have done for the landlord in the letting of a property. In both instances, the court found that the fees charged were void under the provisions of the 1986 order. The court ordered that the tenant is entitled to have the fees returned to him.

    In summary 

    The judgments provided by District Judge Gilpin are detailed and comprehensive. They show there is a general rule that when a landlord instructs a letting agent to let a property, they are acting for the landlord and not the tenant or prospective tenant.

    It follows 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.   

    Housing Rights sees these judgments as establishing an authority that many, and probably most, fees charged to tenants by letting agents during the course of letting the property are unlawful. Housing Rights see that charging upfront fees to prospective tenants remains a common practice. In some cases, these fees can be up to £100.00. These fees represent a significant barrier to accessing affordable housing. This in turn has a disproportionate impact on low-income households and students.

    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 from being sought by letting agents from tenants. It is hoped that this judgment will address this unhealthy practice and re-establish the position of existing legislation in preventing the charging of such fees.

    Get advice on letting fees

    Tenants with evidence of paying letting fees in the last six years could seek to have the charges refunded. Whilst this 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.

    Any tenants who may have been impacted should get advice. Contact our helpline: