COURTS: Latest Tenant Fees Act ruling is warning to letting agents

Tribunal judge rules that charging early-exiting tenants for lost rent and agency fees constitutes a prohibited payment under the Act.

winkworth shoreditch tenant fees act

A landlord who reclaimed ‘lost’ rent from early-exiting tenants and whose managing agent charged ‘lost fees’ too have been told by a judge that they both constitute prohibited payments under the Tenant Fees Act.

The decision, which involves a London landlord and his agent, Winkworth Shoreditch, is a warning to the industry for those seeking to push the boundaries of fees charged to tenants.

This case concerned two tenants who had signed an AST for an apartment on Wentworth Street central London in July 2023 for 24 months with a break clause at 12 months, paying £2,800 a month.

They requested an early termination four months later and were required by Winkworth to pay £3,577 as an exit fee.

Compensate

It justified the fee because the tenancy contract signed by the tenants said: “The rent achieved from new tenants may be lower than the £2,800pcm you pay currently and so you would be required to compensate up to this amount depending on the rent achieved from the new tenants.”

It said the fee was calculated at £1,881 for seven months’ remaining tenancy, at £268 a month, as well as admin and referencing costs of £375.

A new tenancy began on 15th December at a monthly rent of £2,600 – £200 lower than the former tenants’ £2,800 rent.

But a Tribunal judge disagreed with this wording, deeming it a prohibited payments and the landlord to pay the former tenants £2,252.

They had argued successively that the amount claimed by the landlord and agent were excessive and prohibited under the Act.

Double recovery

The judge also ruled that the landlord’s loss of letting fees was essentially a ‘double recovery’ as the payment could reasonably be transferred to the new letting of the premises and did not represent a genuine loss.
He said the tenants should not be liable for the loss to the landlord for the lower rent charged to the new incoming tenants.

“Having accepted an early termination of the tenancy, the landlord is liable to mitigate his losses,” the judge said.
“The applicants cannot be held responsible for the alleged changes in the letting market. Arguably, had the landlord been able to let the subject property for more than the £2,800 pcm, they might argue they should have been entitled to receive the difference.”

Winkworth has told The Neg in response to the ruling that: “We are advising our landlords of the risks in agreeing to an early release. They must ensure when calculating the amount to be paid, it is an accurate reflection of the landlord’s actual losses.”


4 Comments

  1. But the Tenant Fees Act allows Payment on variation, assignment or novation of a tenancy providing it is reasonable. Next time hand it over to a solicitor who charges £350 an hour to do the donkey work of a change of tenancy nothing unreasonable about that with the tenant footing the bill.

    When a building society repossesses a property and sells it on the open market the mortgagee is liable for any shortfall in the sales proceeds including COSTS. The borrower has no protection from a negative change in the market.

  2. Typical pompous Judge, sat in their ivory tower, casting judgement. They don’t seem to understand what it’s like in the real world! Always siding with the tenants and (as usual), vilifying agents and landlords. On a separate note, God help the PRS if Labour get into power – although, blue or red Government, we’re doomed!

  3. So don’t allow tenants to leave a tenancy early and take them to court for the full amount of rent legally due. In this case that’d be 7 months rent (£19,600) vs an early termination fee of £1,881 (due to the landlord having to pay the agent 7 months sooner than planned & the difference in rent for the new tenancy).
    Yes, that sounds completely logical – great job guys!

What's your opinion?

Back to top button