How letting agencies are using loopholes to charge fees ahead of the tenant fees ban In the run-up to the fees ban, some letting agencies are taking action

The Tenant Fees Act 2019 will come into effect on 1 June in England and 1 September in Wales. It’s billed as a game changer for private renters which will ban all upfront fees such as ‘administrative fees’, ‘credit check fees’ and ‘tenancy renewal fees’. Such fees currently set tenants back £272 per person on average.

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In the run-up to the fees ban, some letting agencies are taking action. i understands measures include charging monthly fees under optional ‘no deposit schemes’ and pressuring tenants to renew early in order to collect fees before the ban kicks in.

i has received reports from several tenants that lettings agencies are asking them to renew ahead of 1 June. Several landlords have also approached i with emails from their managing agencies informing them some fees – which range from £38 in Southampton to £480 in London – are being passed onto them from June.

Asked to pay to resign or leave

Laurence Huntington, a 24-year-old customer service worker from Leeds and his partner Tom Hannah, who works at Leeds University, believe they were “pressured” into renewing early and paying fees or accepting a rent rise by their lettings agency, Leeds Rentals. They told i they received an email from Leeds Rentals in April asking them and their housemate to pay £140 per person to renew before their contract ends on 31 July.

‘We had until 11 May to make a decision: we could either pay the fees or deal with a rent hike of £45 a month’

“The agency then told us that we had until 11 May to make a decision: we could either pay the fees or deal with a rent hike of £45 a month,” says Laurence.

The next time they say they heard from Leeds Rentals was during a phone call asking for permission to enter the property for a house viewing, which Laurence says he refused because he and Tom were “in discussions with the landlord about the proposed fees and how to avoid them”. They regarded the instigation of viewings as a “pressure tactic”.

“This was when Leeds Rentals again asked for £140 per person and said that if we didn’t sign by the start of May they would have ‘no option but to put our house on the market’,” says Laurence.

Landlord unaware of rent increase

The pair contacted their landlord again who they say told them to wait until after June and was unaware of an increase in rent. In a subsequent email to the couple from Leeds Rentals seen by i, the agency warns: “If you are not able or willing to resign by this date then we already have a number of groups who will be willing to secure the property at the increased rent, which we will advise the landlord to accept.” All of this made the couple feel “incredibly stressed”.

“The main issue is that they’re willing to kick tenants out, essentially making them homeless, for the sake of £300 which is quite astounding,” says Tom.

Leeds Rentals told i: “[We are] not aware of any stipulations being made from our side in respect of resigning, and all tenants are free to resign for their property at any time of the year if it is still available. As the majority of our properties are within the student catchment area, we tend to start marketing several months in advance as that is when tenants start looking.”

In the end, Laurence and Tom conceded they would have to accept a rent increase in order to avoid the fees upfront and keep their home. This was despite an intervention by their landlord on their behalf.

It is not against the law to ask a tenant to renew early in order to charge fees before the ban prohibits them, but the Tenant Fees Act states any contract which begins after 1 June should not have any fees attached, regardless of when it is signed.

The Tenant Fees Act will also cap deposits at a maximum of five weeks’ rent and one week’s rent for holding deposits. Deposits are usually the largest upfront cost for renters, averaging £1,110 per tenancy in the UK, according to the Tenancy Deposit Scheme.

In the run-up to the cap, several agencies have developed so-called ‘deposit-free’ options.

Monthly fee schemes

Leaders, a letting agency with more than 100 branches nationally, is offering tenants a ‘no deposit option’ which they recently rebranded to ‘the Residency membership’.

Once in the scheme, tenants pay a ‘small monthly fee’ which is four per cent of their monthly rent plus VAT, instead of an upfront deposit. On their website, Leaders say: “Say goodbye to months of saving and hello to deposit-free renting. As part of the Residency, the No Deposit Option means you will no longer have large deposits tied up for the duration of your tenancy. Please note: The tenant is still liable for any damages at the end of the tenancy.”

Tenants who sign up are able to rent without a deposit while accessing a host of ‘benefits’ including having their rent added to their credit score via Experian, ‘will writing’, a ‘credit score review’ and up to £100 credit with Virgin Media.

The monthly fee does not protect tenants from future damage claims and once the tenancy ends, Leaders can come after a tenant for any claims the landlord might have – under the threat of court action.

‘They wanted eight weeks’ rent to switch to a deposit’

Fatima Cande, a 44-year-old education worker who had been paying Leaders £31.20 for six months as part of the ‘no deposit option’, discovered renting without a deposit could be more costly.

“In person they made it sound like it was easier, cheaper and something to help tenants. I did not understand the terms because Leaders didn’t give me the full information on the NDO until I had signed my tenancy agreement via docusign, but it was too late then.”

On realising the £187.20 she had paid in total was not only non-refundable and not redeemable against any claims made by her landlord, but also not protected by any verified deposit protection scheme, Fatima felt she had been misled and complained to Leaders.

Fatima would have to pay “an administration fee of £100 plus VAT” as well as a “deposit amount equivalent to eight weeks rent: £1,300” in order to switch to a traditional deposit and enter a protection scheme

In emails exchanged between her and the agent last month seen by i, Leaders say Fatima would have to pay “an administration fee of £100 plus VAT” as well as a “deposit amount equivalent to eight weeks rent: £1,300” in order to switch to a traditional deposit and enter a protection scheme.

Fatima said she “no longer trusted” Leaders and decided to end her tenancy at the six-month break clause in February this year as a result. This was when she discovered the full extent of her liability.

“Leaders hit me with cleaning and maintenance claims coming to a total of £428.50 (which included £8.50 to change a lightbulb, £100 for painting scuff marks inside a cupboard, £20 to fix a shelf that was already broken and £198 to replace a mattress which was so damaged that I complained when I moved in) plus £120 for an ‘arbitration fee’ for me to appeal the deductions,” she says. “I feel I was duped – the ‘no deposit option’ isn’t a protected deposit so I couldn’t even raise a free dispute with the My deposit or the Deposit Protection Service.”

Leaders say they have now “removed any fees associated with switching to a traditional deposit to make it easier for our customers to make that choice.” But the agency has confirmed it has no plans to discontinue the scheme after 1 June.

Hannah Slater, Policy and Public Affairs Manager at Generation Rent, said: “Deposit alternatives have sprung up with very different models, which can make them tricky for renters to compare. The end of tenancy dispute and process varies, with some charging tenants more than £100 simply to dispute claims made by the landlord. While most aren’t regulated, some are FCA regulated, which gives tenants extra protection if they believe damage claims are unfair. But with all of these products, tenants aren’t covered for damage. That can get expensive if your deposit alternative is a monthly charge on top of rent.”

A bad deal for tenants

Giles Peaker, a partner at Anthony Gold Solicitors who specialises in housing, told i while these schemes are “broadly legal”, once the tenant fees ban comes into effect no agency can require a tenant to enter one.

“It is a bad deal for the tenant, I think,” he added. “Either way, the tenant pays money they won’t get back ever. The only small advantage for the tenant is not having to pay a deposit upfront.”

While deposits and fees will be capped by the Tenant Fees Act, the charges that could be brought against a tenant who voluntarily enters one of these ‘no deposit’ schemes are not. Ultimately, those who can’t afford five weeks’ rent upfront and opt for monthly payments could be stung by bigger charges in the long run.

Leaders told i: “Leaders set about introducing a scheme that ensured tenants were able to choose between a traditional deposit or an alternative where there was no deposit to pay whilst providing landlords with security. We have since developed the proposition to add in a range of additional benefits to the tenant, including legal advice, first-time buyer advice, a free will, a link to the Experian credit record and access to a consumer discounts portal.”

Michael Cook, National Lettings Director at Leaders, added: “It is made clear from the outset that the tenant will remain liable for all damages at the end of the tenancy (much as they would with a traditional deposit) and that the scheme is in no way an insurance policy.”

i asked Experian whether a tenant needs to sign up via their letting agent to have the rent they pay recorded on their credit history. Experian said the service is free to sign-up to, “for both tenants and housing providers.” Experian added that it is free for anyone to “contribute data to the Rental Exchange on a monthly basis”.

Agencies not displaying fees on websites

The lobby group Generation Rent has conducted a mystery shopping exercise which found 21 agencies across the country were not displaying their fees.

Under the 2015 Consumer Rights Act, lettings agencies who do not “clearly” display fees they charge tenants inclusive of VAT can be fined £5,000 by Trading Standards.

Generation Rent found 21 agencies were failing to comply with the Consumer Rights Act at the time of their investigation by either not listing their fees at all on their website or not listing them ‘clearly’ and in detail. Leeds Rentals and Leaders were not included on this list.

Georgie Laming, Campaigns Lead at Generation Rent said: “Failing to display fees is in breach of Consumer Rights Act 2015 and it’s ripping off tenants who can’t make an informed choice. This is raising serious alarm bells about how far letting agents will go to flout the law. Whilst it’s clear that the Tenant Fees Act is a brilliant victory for renters, we need better enforcement of the law if it is to work properly.”