Following their consultation on the issue of unlawful letting agent charges in May 2012, the Scottish Government have announced that a change to the definition of a 'premium' will come into effect on 30 November 2012.
Currently, the definition of a 'premium' is contained within section 90 of the Rent (Scotland) Act 1984 which states that it includes "any fine or other sum and any other pecuniary consideration in addition to rent". Premiums are payments which are required by a landlord as a condition of the grant, renewal or continuance of a tenancy.
Section 32 of the Private Rented Housing (Scotland) Act 2011 will amend the existing definition of 'premium' as contained within the 1984 Act to clarify that a 'premium' means "any fine, sum or pecuniary consideration, other than rent, and includes any service or administration fee or charge."
This new definition will make it clear that many of the fees currently charged by landlords and letting agents will be 'premiums' and will be clearly unlawful letting agent charges.
The 2011 Act also gives the Scottish Government the power to amend the definition further, but there appear to be no plans to do so at this stage.
The practice of charging 'fees' varies from agent to agent. Some believe that it is possible to run their business without charging such premiums to tenants, whilst others believe that there are reasonable charges which should be permitted, the most common being fees to cover referencing checks. The common complaint by tenants is that some agents don't just charge the tenant the cost incurred by them in obtaining a reference from a reference agency, but instead inflate the fee without justification. The clarification that service charges and administration fees are now 'premiums' and thus unlawful should be noted by all landlords and agents and practices should now reflect the legal definition.
Agents should be aware that any fees which have already been charged to tenants may still be open to dispute by those tenants who have paid them. Many tenants are now requesting that these fees are refunded to them on the basis that they were unlawful premiums under the 1984 Act definition.
Any agents who require further advice regarding this issue should contact a member of our LetLaw team.