Our letting agent is charging us a £400 remarketing payment for leaving our tenancy early – is that authorized?

My boyfriend and I are looking to leave our tenancy agreement early as we just find the flat too small. After a bit of back and forth with our landlord, they have agreed to let us leave the tenancy contract early.

We have given our two months notice and found somewhere we want to move to and have paid a deposit to reserve it.

The problem is, while our landlord has agreed to let us leave the tenancy early, the letting agent who he uses to let the property is now saying they will charge us a £400 remarketing fee.

We were under the impression these types of fees between agents and tenants were banned. Can they charge us this? It seems a total farce – won’t the landlord need to pay them a re-letting fee anyway for finding a new tenant?

What should we do? Should we ignore the letting agent and just move out on the agreed date with the landlord? Or should we pay the £400 remarketing the charge? 

We never paid a deposit when we first moved in as it was a zero deposit agreement.

Ed Magnus of This is Money replies: At first glance, this seems like an odd fee for a letting agent to charge you.

Based on the fact you are in direct contact with your landlord, I am assuming they are managing the property themselves, rather than the letting agent.

Even so, the landlord will also likely be asked to pay the letting agent a fee for finding a new tenant. They will also likely face costs for referencing and arranging the new inventory, for example.

If the landlord is expected to pay for finding a new tenant, then it is difficult to see how the letting agent can justify charging you an additional fee for remarketing. 

It may be that they are taking advantage of the situation and making more than they might otherwise during a normal tenancy changeover.

It would be worth speaking with your landlord as it may be that the letting agent is passing some of their costs over to you, given that you are exiting the contract early.

You are also right to point out that letting agents should no longer be charging additional fees to tenants except from the obvious ones – namely the upfront deposit and the rent.

The ban on tenant fees applied to new or renewed tenancy agreements signed on or after 1 June 2019.

Instead, it is now the landlord who is generally responsible for paying the additional costs associated with re-letting a property and finding new tenants.

However, the new rules also say letting agents (or landlords) can charge for extra costs associated with the early termination of a tenancy, when this is requested by the tenant.

Since you have made this request, it means they could be within their rights to charge you, albeit with certain restrictions. 

Generally, the costs charged for early termination must not exceed the costs to the letting agent for things such as referencing and marketing costs. But these costs must be reasonable.

The guidance states that where agreed to, the agent should consider on a case-by-case basis whether it is appropriate to charge an early termination fee, for example, whether there are any exceptional circumstances which require you to leave early.

It also suggests that a letting agent can charge a fee to cover any referencing and advertising costs they have incurred as a result of you leaving early, but they should be able to provide evidence to demonstrate these costs. 

In terms of the landlord, it’s also worth pointing out that If they have agreed to let you leave early, they can ask you to pay rent as required under their tenancy agreement until a new tenant is found. 

However, given your landlord has agreed to let you go, I am assuming they may not be holding you to this beyond the two months of rent due following your notice. Worth getting that in writing though. 

For expert advice, we spoke to Jacqui Walton, a senior paralegal for property disputes at RWK Goodman solicitors, Olivia Egdell-Page a partner and head of the property department at Joseph A Jones & Co solicitors, Oli Sherlock, managing director of insurance at Goodlord.

Can letting agents charge renters extra fees? 

Olivia Egdell-Page replies: For tenancies which commenced after 1 June 2019, which I am assuming yours did, additional controls were introduced which significantly limited the fees that landlords and letting agents can charge tenants on the commencement of, during or at the end of their tenancy.

Since that date, landlords and letting agents cannot no longer charge for references, administrative tasks, credit and immigration checks or renewing your tenancy at the end of a fixed term contract, amongst other tasks.

Can the letting agent charge a tenant for remarketing? 

Jacqui Walton replies: If your landlord allows you to end your tenancy early, he is entitled to request a payment from you in exchange for allowing you to do so. 

However, if the payment he is asking for exceeds the loss which will be suffered by him then that excess will be a prohibited payment under the TFA2019. 

Likewise, the landlord’s letting agent is permitted to request payment from you for arranging the early termination of your tenancy but this must not exceed the letting agent’s reasonable costs, otherwise again the excess will be deemed a prohibited payment under the TFA2019.

Olivia Egdell-Page replies: In the event that you agree with the landlord or agent to leave your tenancy early, there are limited circumstances in which they can impose charges, but these are only permitted where they cover loss of money or the reasonable costs incurred by the agent.

They could also charge you a fee of up to £50.00 where you transfer your tenancy to someone else, for example if you found a replacement tenant to take over the property. 

The charges can only exceed £50.00 if the landlord can evidence that their costs exceeded that sum.

Query the £400 charge?

Jacqui Walton replies: In your case the letting agent is permitted to ask you to make a payment to them for dealing with the early termination of your tenancy. 

It can be difficult to establish what the letting agent’s reasonable costs in arranging the early termination of a tenancy may be, however, so it would be worth checking with the letting agent what the £400 charge specifically relates to. 

Establish whether this is their standard charge for dealing with arrangements for an early termination of a tenancy. 

You can then be more certain you are being charged a reasonable amount by them.

Don’t pay?

Olivia Egdell-Page replies: Having considered your position, it doesn’t seem likely that the agent would be able to justify charging this fee for remarketing the property, and if they do, this would need to be borne by the landlord.

What if they have already paid?  

Olivia Egdell-Page replies: That does make it more difficult.

I would suggest that in the first instance, they ask that this be refunded as it is likely to be considered a prohibited fee.

If this request is declined, they can report the agent to Trading Standards. I understand that where an agent breaks the rules more than once, the council can take legal action and can prohibit the agent from renting out properties in the future.

They also could complain to the letting agent redress scheme, which the agents are required to be members of, or as a last resort, they can apply to the First Tier Tribunal, however given the fee that has been paid, this may not be cost effective, on balance.

The charge seems reasonable given the circumstances

Oli Sherlock replies: Given you are choosing to mutually end the agreement early your landlord or letting agent can impose an early termination fee. 

Such fees cannot exceed the amount of rent that would have been applicable for the duration left of the fixed term. 

They can also pass on reasonable costs incurred as a result of the tenancy ending early. 

As such, it sounds like the suggested charge of £400 seems reasonable against an average rental value. 

This charge should not be conflated with any monies owed via a deposit or deposit alternative solution. 

Via both, you remain liable for any rent not paid within the agreed period along with any dilapidations above and beyond fair wear and tear. 

What else would you advise in this situation?

Oli Sherlock replies: I’m assuming that you have a fixed term agreement, therefore you were right to seek mutual agreement to terminate your contract early. 

As with any agreement it’s important you have such terms agreed in writing to ensure clarity for both parties.