Letting agents warned after firm caught taking fees from tenant’s deposit
Letting agents have been warned not to take their tenancy fees from a tenant’s deposit after a firm was caught admitting it was ‘standard practice’.
The comments have been made by HF Assist mediation expert Julie Ford after she was made aware of a landlord complaining on social media about the practice.
This landlord said the tenant’s deposit was forwarded to them minus the agency’s 20% ‘tenant finder’ fee and they were told to ‘top it up’ before protecting it within one of the Government-approved schemes.
While this may seem logical, Ford says professional letting agents should be aware that it is against industry codes and treated as ‘fraud by false representation’ by the courts.
“Deducting a fee owed to the agent by the landlord from the tenant’s deposit is wrong but subsequently telling the landlord that they now have to top-up the tenants own money before protecting the deposit is just outrageous,” she says.
“Money paid to the landlord as rent is the landlords’ money, so the agent would be entitled to deduct their fees from the first month’s rent for example,” she says.
“But the tenancy deposit is not the landlord’s money, it is the tenant’s money at all times throughout the tenancy and remains so until the landlord can provide reason why they wish to make a deduction for damage/dilapidation or rent owed when the tenancy ends.
Ford says if an agent deducts their fee directly from the tenants deposit they have committed an illegal act called fraud by false representation.
“This is because they have deducted a fee owed to them by someone else from the tenant who doesn’t owe them the fee.
“Fraud by false representation is the act of dishonestly making a false representation to make a gain or cause a loss for another individual.”
“The agent in this case is on very thin ice indeed, as the act of fraud by false representation is a criminal offence which holds a maximum sentence of 10 years imprisonment and a fine.”