Out-Law News 2 min. read
27 Aug 2012, 3:50 pm
Housing Minister Keith Brown said that the existing law would be "clarified" to ban all other tenant charges, including those for reference and credit checks and inventory fees. The change follows a consultation earlier this year on how to deal with "unfair and illegal premiums" charged by private landlords.
Under the Rent (Scotland) Act, landlords and their agents can legally charge rent and a deposit only when granting a tenancy. However, Brown said that the current law was not "explicit enough" about additional charges.
"The majority of letting agents operate in a thoroughly professional manner and play an important role in the Scottish private rented sector," he said. "However, numerous cases of tenants across the country being ripped off were uncovered by Shelter Scotland. As a result of this consultation, we will make it crystal clear to tenants, landlords and their agents that all premium fees, over and above rent and a deposit, are unlawful."
The Scottish Government would bring the necessary legal provisions into force later this year, he added.
Property law expert Rodney Whyte of Pinsent Masons, the law firm behind Out-Law.com, said that although additional fees had always been illegal, clarifying the existing "poorly drafted" legislation was to be welcomed. However, he said that it was unlikely tenants would see much of a saving in real terms.
"Recent trends show that many letting agents have been charging these fees and incoming tenants have been told to pay them or face losing the property," he said. "However, there is a demand for letting agents and they need to make a profit, so it seems likely that they will need to charge a higher management fee to their landlord customers. It is equally likely that landlords will seek to offset at least part of these increased charges in the form of a higher rent - perhaps it will be the case that the tenant ends up paying regardless."
However charities and consumer groups described the announcement as "great news".
"Many tenants have had to pay substantial fees to letting agents and it has often not been entirely clear what all of these charges have been for," Marieke Dwarshuis of Consumer Focus Scotland said. "Clarifying what letting agents can and cannot charge will better protect tenants and should help to ensure letting agents can operate with the trust of tenants. An important next step will be making sure that prospective tenants know about the new rules so they can secure the keys to a new home without worrying about being ripped off by extra charges."
Gordon MacRae, head of communications and policy at Shelter Scotland, said that the charity had been campaigning for an outright ban on additional fees. A website run by the charity had helped tenants claim more than £100,000 worth of fees back from letting agents since its launch, he added.
There are about 500 letting agent businesses in Scotland involved in about 150,000 private lettings a year, according to the Scottish Government's estimates.
