Student lets firm wins landmark contract ‘novation’ fee case
Represented by legal firm Anthony Gold, lettings agency Purple Frog has appealed successfully against both a £2,000 fine and the return of the original fee.
A lettings agency with offices in several big UK cities has won a landmark legal battle with Trading Standards after being fined £2,000 for charging a tenant a ‘novation fee’ fee more than the £50 allowed under the Tenant Fees Act.
Purple Frog, which specialises in student lets in Birmingham, Bristol, Nottingham and Loughborough, had charged a tenant the fee after she requested to move out of a shared student house in Cottesmore Road, Nottingham (main image) shortly after moving in.
The company agreed to the ‘novation’ of the ‘jointly and several’ tenancy contract so that she could move out and a replacement take her room, but pointed out this would cost the company £175 to complete. She paid this fee but then reported the company to the National Trading Standards Estate and Letting Agency Team (NTSELAT) and sought to have £125 returned to her.
Purple Frog boss Patrick Garratt engaged legal firm Anthony Gold Solicitors to help him fight the case, and he and two other of his staff gave detailed evidence to the Tribunal appeal hearing about the costs of the contract novation.
Garratt also highlighted to the Tribunal the benefit that tenants obtain from landlords and agents being willing, as Purple Frog was, to carry out the administrative work which permitted individual tenants to be released from fixed-term tenancies early.
Preferred intepretation
Purple Frog’s counsel Robin Stewart also argued that NTSELAT’s ‘preferred interpretation’ of the Act would make it more difficult for tenants to secure assignments and novation, since some landlords and agents would simply refuse to provide these services if they could not recover the real cost of doing so.
The Tribunal decided that where a landlord or agent carries out a novation of a tenancy at the tenant’s request, the Tenant Fees Act 2019 does not limit the amount of the costs for a variation, assignment or novation to £50 but, instead adds a test of reasonableness should such costs exceed £50.
Staff costs
After seeing Purple Frog’s detailed breakdown of its staff costs to vary the contract, the Tribunal said the cost of the work in this case was ‘reasonable’ and less than the maximum which could have been charged.
This means the fee was lawful, and the financial penalty had been wrongly imposed. NTSELAT has not sought permission to appeal.
Stewart adds: “This successful appeal follows a handful of cases where the judges in the First-tier Tribunal have applied the provisions in the Tenants Fees Act allowing landlords and agents to charge reasonable costs in quite different ways.
“In the absence of any binding Upper Tribunal case law on the Tenant Fees Act 2019, this detailed appeal decision, where both parties were legally represented and the ‘lead enforcement authority’ for the Tenant Fees Act was a party, is particularly notable.”
