Recent decisions concerning the Tenant Fees Act 2019
The Tenant Fees Act 2019 (“TFA 2019”), amongst other things, regulates payments that can or cannot be made by tenants to their landlord/the landlord’s agent. There have been two recent decisions dealing with these matters. One in the Court of Appeal and the other in the First Tier Tribunal. Below, I have discussed these decisions.
Switaj v McClenaghan [2024]
This case concerned the payment of an administration fee of £120.00. There was also a fee for a checkout which was not specified. The first fee was charged “preparation of any documents in relation to all renewals or extensions of this Tenancy” while the second was for the costs of any eventual checkout clerk. Ms Switaj entered into an AST with Adrian McClenaghan on 12 April 2018. At the time the tenancy was entered into, the Tenant Fees Act 2019 had not been enacted. Therefore, the fee of £120.00 was not a prohibited payment and neither was the checkout fee.
There were subsequent renewals of the AST. It was possible the renewal in 2019 was a statutory periodic tenancy. Subsequent tenancies were entered into in 2020 and 2021. New ASTs were signed for these tenancies. The aforementioned term did not form part of the agreements that were entered into after the enactment of the Tenant Fees Act 2019.
Ms Switaj sought to argue that the term to pay an administrative fee was implied into the post 2019 ASTs. She also argued that the checkout fee was carried over as she had yet to actually move out of the property and so the landlord was effectively holding this money, unlawfully, until such time as she eventually checked out of the property. Therefore, the 2021 tenancy (which Mr McClenaghan sought to terminate) sought a prohibited payment and a section 21 notice could not be relied on.
The Court of appeal rejected this reasoning. The TFA in their view did not act retrospectively. The previous payment and retention of payments which were not prohibited at the time but which became prohibited payments as a result of the TFA did not invalidate the section 21 notice.
Purple Frog Asset Management Ltd v National Trading Standards Estate and Letting Agency Team
This concerned the payment of a fee by Ms Alam to novate her tenancy. Purple Frog is letting agent, at which Ms Alam had a tenancy. Prior to commencement, Ms Alam decided she did not wish to move into the property. She managed to locate a replacement tenant. A novation of the tenancy was agreed. Purple frog charged Ms Alam a £175.00 fee to assign her tenancy.
Ms Alam made a complaint to Nottingham City Council. Ms Alam argued the payment was a prohibited payment. The local authority issued a Notice of Intent on Purple Frog, followed by Final Notice. Purple Frog disputed the Final Notice. As set out in the tribunal decision, the only questions for the tribunal were:
“(i) whether a prohibited payment had been taken from Miss Alam; and
(ii) if a prohibited payment had been taken, should the Respondent have imposed a financial penalty in this matter and was the amount of the penalty imposed reasonable.”
The TFA 2019 allows agents or landlords to charge for novation. The costs that can be recovered are the greater of £50.00, or the reasonable costs of the person to whom the payment is to be made (Paragraph 6, Schedule 1 TFA 2019).
Purple Frog were successful in quashing a final notice dated 8 March 2024. The FTT determined the payment made by the ex-tenant to Purple Frog was not a prohibited payment. Purple Frog were able to demonstrate the fees charged no more than their reasonable charges.
The Tribunal made clear each case will run on its own facts. Agents/Landlords will have to prove the fees charged were no more than their reasonable costs. Further, this is an FTT decision and so is not binding on the UT or higher courts.
Ms Alice Beckett v Hunters Estate & Letting Agents Stoke Newington
This is another FTT decision concerning the payment of a fees for novating a tenancy agreement. Here, Hunters Estate & Letting Agents Stoke Newington sought a payment of £250.00. This related to their costs to novate the tenancy agreement.
Ms Beckett made an application to the FTT. On her case, the £250.00 related to a prohibited payment. Hunters in a letter dated 23 October provided a detailed breakdown of the costs they had incurred.
The Tribunal dismissed the application. In a fairly short judgment, they held that Hunters had “reasonably accounted for the fees it asserts it incurred, as a result of the applicant’s wish to assign her tenancy to another prospective tenant”.
Conclusions
These decisions will likely be well received by landlords.
In the case of Switaj, section 21 notices are due to be abolished. Whilst this may offer some respite in the short term, within the near future, section 21 notices will not be a viable option for Landlords and so it is not clear that TFA breaches will impact on possession cases in future.
Turning to the two Tribunal cases, the FTT does not bind itself. Different decisions may go different ways. However, the fact that two decisions have both recently said that a fee over the £50 threshold was reasonable is positive. It is likely to give some confidence to agents and landlords in this area.
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