The Tenant Fees Act has changed the game!
The Tenant Fees Act (TFA) introduced a number of changes when it came into force in 2019, including changes to early termination fees. While this part of the new rules has attracted less attention than others in the act, it is a bit like the new handball law in football, which can lead to confusion and misinterpretation.
What do you need to know?
The TFA clearly
lists early termination fees as one fee that can be charged to a tenant,
but these charges must be clear, reasonable and have evidence to support the
actual costs. It is this last point that I want to stress, with agents and
landlords needing to be more open and honest when discussing fees.
Previously,
when these fees were disputed by a tenant and a case went to a mydeposits
adjudicator, we would award if the tenant was clearly reminded of their
contractual responsibilities in the tenancy agreement but only if they had
signed the tenancy agreement and were given clear information and a cost
breakdown (ideally as a calculation) of the re-letting costs and any commission
fees. The tenant then had the choice of whether to accept and move out or
disagree and stay.
Where a
tenant accepted the conditions for moving out early and then disputed the fees,
we were unlikely to accept a dispute but may have taken a view in relation to
the ‘reasonable’ test.
A third,
less common scenario would be where a tenant moves out without asking to end
the tenancy early, often known as abandonment.
An
adjudication decision was then made based on whether it would be ‘reasonable’
to award the amount claimed. Seems simple enough!
So, what has changed? You must prove you are out of pocket!
Well, while
all the requisites above still apply for re-letting costs there is one
addition. In line with legal opinion, the interpretation of what
constitutes evidence for a successful claim for fees is the need for ‘invoices’ to support actual costs.
We are well
acquainted with tenants who raise disputes in these situations, however up till
now we have not required invoices to make an award. Ongoing, if a tenant
disagrees with, stays silent or simply moves out, and then disputes the
proposed cost, to rightfully retain any fees from the deposit, you will now
need invoices to prove the loss.
In fully
managed properties agents may generate their own invoices, or landlords and
agents may have separate invoices for things such as advertising, referencing,
inspections etc. All of these are valuable evidence when it comes to proving
reasonable costs.
Agents! Watch for double
fees!
In relation
to an agent’s commission fees, where the same agent is re-letting the
property, to make any claim, you will be required to provide invoices setting
out the amount the landlord is responsible for paying for the tenancy ending. This
will show the actual loss as well as evidence that a new commission will be
payable for the next tenancy. Where a different agent has re-let the property,
the landlord will need to show that the second commission fee has been
invoiced.
Where we do have discretion when making decisions is on the ‘reasonable’ test. It is likely to be unreasonable to award a claim of £750 for re-letting fees where a tenant has asked to leave early, disagreed with the proposed costs, and found the new tenant themselves before leaving. I believe a landlord or agent would have difficulty proving this is their actual loss.
Similarly, with commission fees, it would be unreasonable to
make an award if the agent has agreed to waive the outstanding commission in
return for re-letting the property and fully managing it.
While this adds to the evidence gathering stage ahead of
discussion or dispute, this more thorough approach ties in with the
transparency and clarity required by the Tenant Fees Act and, with this in
mind, please don’t get caught out!
For more detail, see our guide on Early termination fees and what more you need to know about both re-letting and commission fees.
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