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Update: from 30 November 2012 the definition of an unlawful 'premium' in section 90(1) of the Rent (Scotland) Act 1984 has been amended as follows:““premium” means any fine, sum or pecuniary consideration, other than the rent, and includes any service or administration fee or charge;”.
Accordingly, any service or administration fee or charge other than rent is now expressly prohibited by statute as an extra charge to tenants in Scotland. See further. The note below is still relevant for pre-30 November 2012 premium charges; from 30 November 2012 where a landlord imposes extra charges (for reference checks, inventories, administration charges) these will be unlawful in terms of section 90(1), 1984 and recoverable by way of a small claims actions if the landlord refuses to refund (see the guidance on small claims below).
GLC has settled an action for the return of an unlawful tenancy premium, charged to a Glasgow private sector tenant to cover the cost of a credit reference check and the letting agents' administrative costs. The company, one of the biggest estate agents in Scotland, refunded the £235 premium in full, with court costs, without conceding liability.
Estate and letting agents in Scotland regularly require the payment of such charges before they let properties to tenants in the private rented sector. Yet, any charge in addition to rent (or a lawful deposit) is an unlawful 'premium' under Scots law, punishable by a statutory fine on a successful prosecution, and liable to be refunded to the tenant. The relevant law is set out here.
GLC's Mike Dailly said:
"Based on Scottish Government research, Govan Law Centre estimates that tenants in the private rented sector in Scotland could be getting fleeced by £2m or more per annum by estate and letting agents. That equates to around £200 per tenant under the guise of 'administration charges' and/or 'credit reference checks'."
"We believe Scots law is quite clear here. Any charge which is a requirement to obtaining a tenancy is a premium unless it is for rent or a lawful deposit. Premiums charged to tenants may constitute a statutory criminal offence, and the law entitles tenants to seek a full refund of such charges".
"The harsh reality is that many tenants who are being asked to pay these unlawful fees are financially vulnerable and desperate to get a roof over their family's head. This is why GLC is launching a national awareness campaign on this issue, and is providing the online legal know-how to empower tenants and their advisors to secure a refund."
An example Small Claims Statement of Claim is here.For the avoidance of doubt, the fact that a requirement to pay a tenancy premium is an express condition of the lease itself, cannot circumvent the terms of the Rent (Scotland) Act 1984: section 82 makes it illegal to charge a 'premium', while section 88 creates a right to be refunded any 'premium' paid under any lease or agreement.
Guidance on raising a Small Claims action in the Sheriff Court is here.
Note on how we calculate our £2m estimate:
The Scottish Government's review of the private rented sector "found that Scottish landlords may be wrongly withholding between £2.2 million and £3.6 million worth of deposits per year, from between 8,000 and 11,000 tenants". Taking 11,000 tenants being charged around £200 in administrative costs, the cost of inventories, credit reference checks, and such like, gives a figure of £2.2m per annum in Scotland.
Here, GLC publishes a client's experience, in his own words, of being required to pay 'service charges' when he let a flat in Glasgow, and how he was able to obtain a full refund."When I moved to Glasgow 2 years ago I needed somewhere to stay. Having found a flat in the city through an agent, when I went to sign for it there were the usual rent in advance and deposits to pay but the agent also added £235 for a “service charge”. When I challenged this I was told it was to cover “preparation of the lease, credit checks, preparation of the furniture inventory” and other items they could not remember. It was also made clear that if I did not pay it then they would not sign me up for the tenancy and the whole search process would start again".
"I signed up and paid the £235 but decided to check on its legitimacy while I was a tenant. The charge is clearly a premium which is an unlawful charge in Scottish law. Not only that, but charges to the tenant for preparation of the lease are explicitly prohibited in Scottish law. At the end of the tenancy I again challenged the service charge and requested its return. The manager of the agency advised me that they were free to charge what they liked and it was a legitimate charge. He is wrong on both counts".
"Govan Law Centre clarified the legal position and agreed to contact the agent for me. At this point the agent offered to return £120. This was returned to them requesting a return of the full amount. They later offered £120 again which was again returned and an action for payment was raised at the Sheriff Court under the small claims system".
"The immediate response was for the agent to refund the charge in full and the costs of lodging the claim with the court. However they still maintain this is a good will gesture and they are entitled to charge premiums in this way. Interestingly the letter says “any prospective tenant has a choice whether they wish to take up the services we offer” so clearly they still intend to refuse tenancies unless this premium is paid".
"The message from this claim is that agents and landlords will probably hold out to the bitter end but if challenged through court, will refund your money."
