The UK’s shortage of affordable homes, especially in and around London, has led to a significant increase in people renting property, with research from PwC earlier this year stating that 60% of Londoners will be renting their home by 2025.[1] In this environment, the two recent class actions brought against the letting agent Foxtons by both a landlord and a tenant, will be welcome news to many who feel that the high level of additional fees encountered when renting a property are unjustified. The average landlord-tenant relationship in the UK need not be a contentious one, and this article offers a brief overview of what charges and fees can legitimately be incurred in a residential tenancy, alongside some of the common issues encountered by both sides.

Before you sign

When looking to rent a property, it is important to remember that no letting agency should charge you to register for their services or to be provided a list of properties available for renting, both of these charges constitute a criminal offence and the letting agency in question should be reported to Trading Standards.

Once you have chosen a property and are looking to sign a tenancy agreement, the crucial point when concerned about what fees, charges or additional costs may be encountered during your tenancy period is to conduct a thorough examination of the lease. This will outline the responsibilities of both the tenant and landlord, whether in terms of how interest accrues on rent arrears to what maintenance responsibilities the landlord has in relation to the property itself.

The lease itself must be clear as to what fees can be charged, the more prominently this is provided, the more likely that it will comply with legislation on consumer protection and unfair contract terms. Since May last year, the Consumer Rights Act 2015 has implemented a number of requirements on letting agents, such as; fee information must be displayed on their website and clearly visible within their office; charges must be clearly identified as per property or per tenant; and, that all charges must be clearly explained and be inclusive of VAT. It is a good idea to make sure your letting agent is following the above requirements, as misrepresentation at an early stage could be a sign of later disputes in the process.

Service Charges, Ground Rent and Insurance

At times controversial due to being a payment over and above rent, service charges vary widely from property to property and are often estimated on an annual basis – sometimes leading to conflict between tenants, landlords and letting agents over whether additional funding is justified for the work which has been completed over the course of that year. When paying service charges, tenants have the right to request a summary of how the charge is worked out and what it is spent on, including being able to view any supporting paperwork such as receipts. This is important for all parties as landlords and letting agents should be ready to justify the service charges levied on property, whilst tenants should keep aware of what maintenance work and improvements are being conducted on or in relation to their property. This is what happened to landlord Chris Townley, who found that his management agent had charged over £200 commission on the installation of a light fitting, provision for which the agent stated was included in its terms and conditions. If you do feel that your managing agent for the property is charging over the odds for work conducted, or as a tenant that the works required are not being completed, requesting a breakdown of how the service charge was spent is a good way of holding the responsible party to account for how they spend the funds and can help with reaching a compromise on cost.

Breach of Covenant

When tenants breach covenants under their lease there can be serious financial consequences, which in some circumstances can lead to the landlord reclaiming possession of the property. This process can be expensive, especially where a lease provides that the tenant is liable for legal fees incurred in recovery of any arrears owed, which can result in a substantial increase in the amount for which a court judgement could be brought. While the retention of solicitors in respect of unpaid arrears can seem heavy handed, this is often the result of lengthy communication between the tenant and landlord or management agent, often used where no response is received to requests for payment. In such circumstances, staying in communication with the party handling payments in relation to your rented property is essential, and could go some way to preventing the imposition of substantial arrears chasing fees.

Similarly, landlords must be careful to follow their obligations in both maintaining rental property and informing tenants of any substantial works they intend to take place. An example of such a situation is where a landlord intends to carry out works on the property which would result in the contribution of tenants increasing by more than £250 a year each. If this is the case, the landlord must consult tenants and provide an opportunity to examine the planned works and suggest alternate contractors, from which the landlord should try to obtain an estimate. This allows for tenants to not be unexpectedly handed large bills for work conducted on the property or surrounding area, and if procedure is followed correctly, helps keep all parties informed as to the justification and costing of the work.

Renting a residential property, whether as landlord or tenant, should not be a painful experience and remaining conscious of what is required under the lease along with knowing your responsibilities under legislation can go a long way towards making residential letting much more straightforward. If you have encountered problems with your leasing of residential property, please contact a member of our Property Litigation team.

[1] http://www.telegraph.co.uk/finance/economics/11754122/Most-20-to-39-year-olds-will-be-in-private-rented-homes-by-2025-warns-PwC.html