What Is a Letting Fee and Are They Still Legal?

A letting fee generally refers to a charge historically levied by letting agents on prospective tenants as part of the process of securing a rental property. These fees were typically upfront payments, separate from rent or security deposits, and compensated agents for various administrative and service-related tasks involved in arranging a tenancy.

Understanding Letting Fees

Letting fees covered services provided by letting agents. These often included essential tasks like tenant referencing, which involved conducting credit checks, verifying employment details, and obtaining references from previous landlords. Agents also typically charged for drafting tenancy agreements and other necessary legal documents, ensuring all contractual aspects of the rental were correctly formalized.

Fees also covered arranging property viewings and facilitating negotiations between the prospective tenant and the landlord. Preparing detailed inventories of the property’s condition and contents at the start of a tenancy was another common service for which tenants were charged. Additionally, agents often administered deposit protection schemes, ensuring that the tenant’s security deposit was handled in accordance with regulations, with associated costs passed on to the tenant.

These fees provided compensation to agents for their efforts in connecting landlords with suitable tenants and managing the initial stages of the rental process. From the agent’s perspective, these charges represented the value of their expertise and the administrative burden involved in securing a new tenancy. Such fees were a standard component of the rental market for many years.

Historical Payment Practices

Historically, tenants paid letting fees directly to agents. This arrangement meant that in addition to the security deposit and initial rent payments, tenants bore the financial burden of the agent’s services to secure a new home. The rationale behind this practice often centered on the idea that tenants were receiving a service from the agent in finding and processing their rental application.

Agents would charge for their role in facilitating the tenancy, which included tasks like conducting background checks and preparing contracts. This was a significant upfront cost for tenants. The payment structure largely reflected the agent’s role in matching available properties with individuals seeking accommodation.

Current Legal Landscape

Legislative changes have altered the legality of letting fees. In England, the Tenant Fees Act 2019 largely banned most letting agent fees charged to tenants for new or renewed tenancy agreements signed on or after June 1, 2019. This legislation aimed to reduce the financial burden on tenants by shifting the responsibility for these costs from tenants to landlords.

Similar bans have been implemented in other parts of the United Kingdom. Scotland, for example, made it illegal for letting agents to charge tenants for services beyond rent and security deposits in 2012. Wales followed suit with the Renting Homes (Fees etc.) (Wales) Act 2019, which prohibited most letting agent fees from September 1, 2019.

These legislative actions mean that in these jurisdictions, the financial responsibility for services previously covered by letting fees has largely transferred to landlords. Agents can no longer charge tenants for administrative tasks, referencing, inventory checks, or tenancy renewal fees. The bans ensure greater transparency and reduce the upfront costs associated with renting property.

Permitted Tenant Payments

Even with letting fee bans, certain payments are still permissible for tenants to be charged by landlords or agents. Tenants must pay rent as stipulated in their tenancy agreement. A refundable tenancy deposit is also allowed, typically capped at no more than five weeks’ rent, or six weeks’ rent if the total annual rent is £50,000 or more.

A refundable holding deposit, used to reserve a property, can be charged, but it is capped at no more than one week’s rent. Payments for default, such as replacing a lost key or security device, or for late rent payments, are permitted, provided they are reasonable and specified in the tenancy agreement. Interest on late rent can be charged after 14 days, usually at a rate no more than 3% above the Bank of England’s base rate.

Payments for early termination are permitted if requested by the tenant and agreed upon, often covering the landlord’s reasonable re-letting costs. Additionally, tenants are responsible for payments related to utilities, communication services, TV licenses, and council tax, unless these are explicitly included in the rent.