Recovering Lower Rent on Re-Lets

Call 0345 872 6666

Recovering Lower Rent on Re-Lets

A recent decision of the First-Tier Tribunal has been exciting interest among agents.

In brief, the FTT was exercising its jurisdiction under the Tenant Fees Act to assess whether a fee charged to a tenant by an agent was reasonable. In this case a tenant had asked to leave a property early by way of surrender. The agent, presumably on instruction from the landlord, agreed on condition that a re-letting fee was paid and that the tenant paid the difference between the current rent they were paying already and any lower rent that was eventually obtained on the re-let. Ultimately the tenant refused this and complained to the FTT.

The FTT held that the re-letting fees were not accurate loss figures and were estimates which exceeded the agent’s fees being charged to the landlord. On that basis they were not recoverable. More controversially the FTT also held that the tenant could not be asked to pay the difference between the original rent and the reduced rent on the re-let as a loss under the Tenant Fees Act. This is a commonly charged loss figure and so agents are quite exercised about this decision. My comments on this are as follows:

  1. FTT decisions are not binding. The FTT has shown itself very unwilling to be bound by the decisions of other Tribunals and the main commonality occurs where the judge is the same. So the fact that one FTT has said that this fee is not recoverable is not really a general statement that these fees cannot be recovered.
  2. The TFA allows claims for losses. Landlords are under no duty to mitigate their losses as regards rent and so do not have to accept surrender and re-let at all. Where they elect to do so then they must mitigate that loss. It seems to me that this is precisely what has happened here. The property was promptly re-let and the tenant was asked to pay the difference in value. That is wholly consistent with case law on mitigation of loss more generally. In short, my view is that the FTT has got this wrong in the sense of saying that this is not a recoverable loss. The FTT rather oddly suggested that the corollary of their decision was that if a landlord got a higher sum on the re-let then that would be a sum payable to the tenant. But this is obviously nonsense. The re-letting came about because the tenant asked to break the terms of the contract. The landlord was entitled to recover any loss they incurred as a result of agreeing to that breach. The FTT was not really in a strong position to then say that a genuine loss was not recoverable.
  3. It is pretty harsh on tenants and scenarios like this demonstrate why there is a drive to get rid of fixed term tenancies for tenants to allow more flexibility. Obviously that will be a matter for whoever is in government after the election next week.
  4. There are real issues with how these losses are being put forward by agents and being dealt with by tenants and the FTT. The FTT seemed to treat all of these losses and fees as agent’s losses and fees. I have no idea why they did so but I suspect they had not been clearly set out to the tenants and the FTT. Clearly all the loss was the landlord’s. A re-let fee was a fee from agent to landlord to find a new tenant which was being re-charged to the tenant. In my experience agents are really unclear about this and present fees to tenants as being charged to the tenant by the agent so they are not exactly helping themselves. Equally, the loss of rent was not the agent’s loss but the landlord’s. Again the FTT saw this as the agent’s loss and refused it on that basis as well as the fact that it was not a recoverable loss under the FTT. Why the FTT thought this I do not know but again I suspect the presentation was unclear. If the FTT was properly informed as to who was actually making the claim then the case put forward by the tenants should have been dismissed or the landlord added in so that it could be dealt with correctly.

As a more general point, I find it quite frustrating that these small matters go before the FTT without any legal argument and are not appealed. Obviously I am biased! However, the development of well-decided case law is an important part of properly understanding the law in England and Wales and so it would be enormously valuable for some of these cases to go beyond the FFT to the Upper Tribunal. These are small matters but where they have industry significance it is a shame that organisations representing the sector are not able to do more to promote and fund appeals.

Did you find this post interesting? Share it on:

Related Posts