Consumer Rights Act 2015 and where we stand?

As I understand it, in Scotland it is illegal to charge tenants any fees at all, they can only be asked for a security deposit equivalent to no more than two months rent, and rent. This has apparently been the case for about thirty years or something like that, but it is only recently that the matter has been brought back to the forefront and letting agents made aware of it, as few people knew.

Hi Annie,

Your reference to tenant fees in Scotland is spot on. Your comment is much appreciated.

My question, however, was, in a broader sense, a question of the interpretation of the Consumer Rights Act 2015.

In simple terms, are letting agents (and estate agents) required to include VAT in their advertised rates/fees?

Whilst acknowledging your reference to tenant fees in Scotland, landlords in Scotland remain consumers.

On that basis, are letting agents required, by the Consumer Rights Act 2015, to include VAT in their advertised fees?

Reply to the comment left by "Andy Loveday" at "16/12/2015 - 12:46":

Under the .Gov consumer rights act specifically for Letting Agents: see 4(c) >> http://www.legislation.gov.uk/ukpga/2015/15/part/3/chapter/3/enacted

Duty of letting agents to publicise fees etc

(1)A letting agent must, in accordance with this section, publicise details of the agent’s relevant fees.

(2)The agent must display a list of the fees—

(a)at each of the agent’s premises at which the agent deals face-to-face with persons using or proposing to use services to which the fees relate, and

(b)at a place in each of those premises at which the list is likely to be seen by such persons.

(3)The agent must publish a list of the fees on the agent’s website (if it has a website).

(4)A list of fees displayed or published in accordance with subsection (2) or (3) must include—

(a)a description of each fee that is sufficient to enable a person who is liable to pay it to understand the service or cost that is covered by the fee or the purpose for which it is imposed (as the case may be),

(b)in the case of a fee which tenants are liable to pay, an indication of whether the fee relates to each dwelling-house or each tenant under a tenancy of the dwelling-house, and

(c)the amount of each fee inclusive of any applicable tax or, where the amount of a fee cannot reasonably be determined in advance, a description of how that fee is calculated.

Hi Neil,

Your outline of the Consumer Rights Act is appreciated.

My question relates to 4(c):

(c)the amount of each fee inclusive of any applicable tax or, where the amount of a fee cannot reasonably be determined in advance, a description of how that fee is calculated.

Does that require a letting agent to include VAT in the list of fees displayed?

I would think if the agent has sufficient turnover to be registered for VAT, and therefore to charge for it, the scale of fees would need to clearly state either that the fees are inclusive of VAT, or subject to VAT, in order that tenants understand exactly what they will be paying.

Reply to the comment left by "Annie Stevens" at "16/12/2015 - 19:25":

Having done some further investigation, it would seem that any % rates (management fees etc.) can be advertised with a plus (+) VAT.

That said, any fixed fees (gas certificate/inventory etc.) must be advertised with VAT inclusive.

Having checked a number of letting agent websites, that is not being observed.

Reply to the comment left by "Andy Loveday" at "16/12/2015 - 14:56":

Hi Andy,

I would think that section 4(c) as you quoted it is as clear as can be: All fees must be listed inclusive of VAT.

Strictly speaking, I would think that percentage fees should also be inclusive of VAT.

Listing them as % + VAT, which is also clear in my view, allows for variations of the VAT rate for fees recurring over a long period.
Therefore, the regulator might be OK with +VAT for such fees but perhaps not for one off fees, which can be listed inclusive of VAT in any case. E.g., 12% instead of 10%+VAT.

Reply to the comment left by "Romain Garcin" at "20/12/2015 - 12:50":

Hi Romain,

I'm on the same page as you. In my view (interpretation) all fees should be listed inclusive of VAT.

The further investigation that I make reference to was The Property Ombudsman. The code of practice (Scotland) states:

Fees and Charges

5 j Where the fee is a percentage you should clearly state whether VAT is chargeable. Any example amount should be based on the rental asking price. However, you must make it clear that, should the agreed rental be higher or lower than the example price, your commission fee will be correspondingly higher or lower.

5 k Where you charge a fixed fee you should state the actual amount payable including VAT in the contract and ensure that the client understands that the fee will not vary whatever the rental income.

The "client" is clearly both landlord and tenant.