Understanding Tenant Fees: Can Letting Agents Charge for Early Termination?

Tenants sometimes find themselves needing to leave a tenancy agreement early. Whether it’s due to personal circumstances or simply realizing the property isn’t suitable, this can create confusion over what fees can legally be charged. In this blog, we explore a common scenario involving early termination fees and clarify what landlords and letting agents can and cannot charge tenants under current legislation.

The Scenario

A tenant and their partner decide to leave their flat early as it no longer meets their needs. After negotiating directly with their landlord, they are given permission to exit the tenancy agreement. The tenants give the required two months' notice, secure a new property, and prepare to move. However, the letting agent managing the property demands a £400 remarketing fee, leaving the tenants questioning whether this is legal or justified.

The Tenant Fees Act 2019: What It Means for Landlords and Agents

The Tenant Fees Act 2019 (TFA 2019) significantly limited the types of fees landlords and letting agents can charge tenants. This legislation applies to tenancy agreements signed on or after 1 June 2019 and applies to:

• Assured Shorthold Tenancies (ASTs)

• Student accommodation agreements

• Licenses to occupy housing

Under the Act, most fees charged to tenants are banned. Landlords and letting agents can only charge for the following:

1. Rent and refundable tenancy deposits

2. Default fees (for late rent payments or lost keys)

3. Tenancy variation or assignment fees (£50 or reasonable costs, if higher)

4. Early termination fees (requested by the tenant, subject to limits)

Can Letting Agents Charge for Early Termination?

In cases where a tenant requests to leave a tenancy early, the landlord or letting agent can charge a fee, but there are strict rules around what can be charged:

• Reasonable Costs Only: The fee must reflect the actual costs incurred by the landlord or agent, such as marketing the property, referencing a new tenant, and creating a new inventory.

• No Profit-Making: The fee cannot exceed the actual financial loss suffered by the landlord or letting agent.

• Evidence of Costs: If a charge is applied, the landlord or agent should provide evidence of the costs incurred.

For example, a letting agent may charge for advertising the property or for referencing checks on new tenants. However, the fee cannot simply be an arbitrary figure, such as the £400 remarketing fee in the scenario described.

Steps Landlords and Agents Should Follow

If a tenant requests to leave early:

1. Agree Mutually: Discuss and document the agreement in writing, including any agreed-upon charges.

2. Justify Fees: If charging a fee, ensure it is limited to reasonable costs and provide supporting evidence (e.g., invoices for marketing).

3. Inform Tenants: Be clear and transparent about the fee, ensuring it complies with the Tenant Fees Act.

When Fees Become Unreasonable or Prohibited

In this case, the letting agent’s request for a £400 remarketing fee raises red flags:

• The landlord has already agreed to the early termination, meaning the agent’s charge may not be necessary.

• The letting agent is likely charging the landlord a re-letting fee, meaning the tenants may be unfairly double-charged.

• The fee appears arbitrary and not tied to specific, provable costs.

Advice to Tenants in This Situation

Tenants facing similar fees should:

1. Communicate with the Landlord: Discuss the fee with the landlord directly. If they have already agreed to let you leave, they may not support the agent’s charge.

2. Request Evidence: Ask the letting agent to provide a breakdown of the £400 remarketing fee.

3. Know Your Rights: If the fee is unreasonable, you can refuse to pay and seek advice from Trading Standards or your local council.

4. Raise a Complaint: If necessary, file a complaint with the agent’s redress scheme (e.g., The Property Ombudsman or Property Redress Scheme).

What Landlords and Agents Can Learn

Landlords and agents must stay informed about tenant fee regulations to avoid falling foul of the law. Charging excessive or prohibited fees can lead to:

• Fines of up to £5,000 for a first offence

• Higher fines and bans for repeated breaches

It’s in everyone’s best interest to handle early terminations fairly and transparently.

Key Takeaways

• Letting agents and landlords can charge a fee for early termination but only to cover actual, provable costs.

• Fees must be reasonable, and tenants have a right to request evidence of these costs.

• Arbitrary or excessive charges (like a £400 remarketing fee) could be deemed unlawful under the Tenant Fees Act 2019.

Landlords, agents, and tenants can avoid disputes by ensuring clarity, transparency, and compliance with current legislation.