Could administration fees be on their way out?

Hayden Glynn, director and head of residential property litigation at Lupton Fawcett.
Hayden Glynn, director and head of residential property litigation at Lupton Fawcett.
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It is common industry practice for a letting agent to charge a prospective residential tenant an administration fee when they seek to secure a new residential tenancy. However, letting agents can often be vague about what exactly they are charging for.

The recent Upper Tribunal decision in London Borough of Camden v Foxtons Ltd [2017] UKUT 349 (AAC) held that administration fees charged by letting agent Foxtons were too vague in their description and therefore were not compliant with the requirements of the Consumer Rights Act 2015 (CCA).

In 2015, Camden Council wrote to all the letting agents in that borough advising that given the provisions of the CCA they could not just state a total administration fee but were required to specify their costs and provide a breakdown of which costs were for which service.

Foxtons continued to display an administration charge of £420 and were served with a non-compliance notice by the local authority. The local authority eventually imposed a financial penalty on Foxtons for the ongoing breach.

Foxtons updated their wording in respect of their administration fee to state that the fee was:

“a fixed cost fee that can cover a variety of works depending on the individual circumstances of each tenancy, including but not limited to conducting viewings, negotiating the tenancy, verifying references and drawing up contracts. This charge is applicable per tenancy, and not per individual tenant.”

The local authority maintained that even with the updated wording Foxtons were still in breach. Foxtons subsequently successfully appealed to the First Tier Tribunal who held that the updated wording was compliant with the provisions of the CCA.

The local authority in turn appealed to the Upper Tribunal asking them to consider if the revised wording was compliant with the statutory requirements.

Whilst giving Foxtons credit for attempting to implement compliant wording Judge Levenson stated that revised wording “does not provide a description of each fee that is sufficient to enable a person who is liable to pay it to understand the service or cost that is covered by the fee or the purpose for which it is imposed” and accordingly was in breach of the requirements of the CCA.

The £18,000 financial penalty imposed on Foxtons clearly demonstrates the risks to letting agents who continue to charge for unspecified administration fees.

If you are a letting agent considering your own administration charges or a tenant unsure of what you are being charged for you should take legal advice to protect your position.

For further help or advice, please contact Hayden Glynn, Director and Head of Residential Property Litigation, on 0113 280 2032 or hayden.glynn@luptonfawcett.law