Sourcing fees for a rent to rent agreement
Resolution requested: A refund of £9,400 (the full sourcing fee, set-up fees, contents fee and fee for setting up the apartments)Award: A refund of £8,000 to the tenantResolved by: Proposed decision
the agent contacted her with a fully furnished one bedroom serviced apartment that was available as a rent to rent opportunity for ‘an ideal entry level investor’ and later offered her a second property
the agent also confirmed the name of the managing agent, which was a different company, who she then signed a three year term with, allowing her to use the apartments for serviced accommodation
she paid the sourcing fees of £4,000 for each property plus set up fees of £700 to another company (£350 for contents and setting up the apartments)
the agent advised her that there was a problem with the managing agent who had not been given permission to use the apartments as serviced accommodation
she sent a complaint to the agent and requested a full refund for both properties
the tenant has made their complaint against the wrong agent which should have been made to the managing agent
the managing agent accepted full responsibility and agreed that they are responsible for any refunds or compensation
Rent to rent tenancy agreement
Emails
Invoices
Screenshots of phone messages
Photographs
1. While there was no evidence of the sourcing fee agreement or terms and conditions between the agent and tenant, there was one tenancy agreement and an invoice containing a breakdown of the sourcing fee, one month's rent and the deposit which had been paid.
2. The third-party company, that was paid £1,400 by the tenant to set up the tenancy, sent the tenant an email advising her that “they weren’t aware of serviced accommodation being offered in the building.”
3. There was no evidence to support that due diligence was carried out by the agent to make sure that the managing agent had the authority to rent the serviced accommodation. The Consumer Rights Act 2015 says that an agent must provide their service with reasonable care and skill and The Consumer Protection from Unfair Trading Regulations 2008 (‘the CPRs’) prohibit businesses from engaging in unfair commercial practices in their dealings with consumers.
4. The agent’s email extract of the managing agent having accepted full responsibility and ‘refunded’ the tenant was not supported by any proof that the funds had been transferred. The case officer decided the agent was to refund the sourcing fees they had received in full, as the agent did not perform their due diligence and advertised properties available as serviced accommodation, when they could not be used for this purpose.
5. The set-up fees (£1,400) were paid to a third party who is not a member of the Property Redress Scheme and the tenant was advised to take independent legal advice to pursue any recovery of these fees.
Carry out all due diligence and that the information you are advertising and giving to prospective investors is complete, and correct, with all material information to avoid misleading prospective clients
Agents must understand that clients will rely solely on the information provided
For more information on what constitutes material information and how is it changing read here. You can also view the guide to consumer protection: unfair trading regulations.
