Annual Report: When should an agent disclose their fees & charges?

Published on Tuesday, 04 October 2016. Posted in Case Studies

The tenants who made this complaint claimed the agent only disclosed all their fees and charges after they had paid a non refundable holding deposit. The Ombudsman’s independent review of the case looked at what information was disclosed and when, to assess if the tenants were treated fairly.

Annual Report Case Summary: Tenant Fees

This case concerns a dispute referred to The Property Ombudsman (TPO) from potential tenants concerning the fees payable to the agent prior to the commencement of the tenancy.

The complainants explained that it was not made clear to them until shortly before the tenancy was to commence that the £250 they had paid to take the property off the market would be used to meet the cost of preparing the tenancy agreement and that there would be a further administration fee payable of £200. The agent maintained that the breakdown of their fees was explained to the complainants at their viewing, and was provided to the complainants in writing.

In accordance with Paragraph 9g of the TPO Code of Practice, the agent was obligated to provide the complainants with written confirmation of all charges and fees associated with their application for the tenancy and the tenancy itself before their offer had been accepted and before they had committed any liability towards renting the property.

In this case, it was not in dispute that the complainants paid £250 to the agent in return for the removal of the property from the market and that those monies were intended to be non-refundable in the event that the complainants withdrew their application to rent the property. There was no evidence, however, to support the agent’s account that the complainants were provided with confirmation of the full fees payable at that stage.

The agent provided a copy of a letter, sent to the complainants prior to the start of the tenancy, detailing the breakdown of the fees payable to the agent.  This confirmed that a fee of £208.33 was payable for the preparation of the tenancy agreement in addition to the fees of £200 payable for referencing and administration. That letter suggested that no VAT was payable on the tenancy agreement fee, however, both the agent’s Tenant Guide and Tenancy Proposal form indicate that the tenancy agreement fee was £250, or £208.33 plus VAT.

While the complainants had signed a copy of the letter, this took place after they had paid the agent a non-refundable sum of £250. Accordingly, the complainants stood to forfeit that amount if they chose not to proceed with the tenancy as a result of the remaining fees payable. By the complainants’ own account, when they were provided with the letter, it was not only a question of forfeiting the £250, but also a question of losing the property that they were due to take occupation of the following day.

The Ombudsman was satisfied that the complainants were aware of the fees payable to the agent before the commencement of the tenancy, but was not persuaded that the complainants were aware of the fees at the first opportunity before they had committed themselves financially towards proceeding with the tenancy. The agent had not fulfilled their obligations towards the complainants under Paragraph 9g of the TPO Code of Practice, and there was a lack of clarity as to whether VAT was payable on the tenancy agreement fee.

The complainants had requested that the agent compensate them in the sum of £250. The Ombudsman did not refund this sum; the complainants ultimately agreed to proceed with the tenancy in full knowledge of the fees that were payable to the agent upon doing so.

However, the failure of the agent to bring all information to the complainants’ attention before they were financially committed towards the tenancy caused the complainants avoidable aggravation and denied them the opportunity to make an informed decision as to whether to make an offer for the property. The complaint was supported and an award of £150 made to reflect the aggravation caused to the complainants in this matter. 

To download a copy of TPO's 2015 Annual Report and view more of the report's case summaries, please click here.