Trading Standards Penalty for Novation Fee Quashed on Appeal

Anthony Gold Solicitors partner Robin Stewart acted for national property agency business Purple Frog in a successful appeal against a financial penalty imposed by the National Trading Standards Estate and Letting Agency Team.

Purple Frog, a property agency business with offices in Birmingham, Bristol and Nottingham, is particularly known for its work in the student accommodation sector, including managing purpose-built student accommodation (PBSA).

The National Trading Standards Estate and Letting Agency Team (NTSELAT) had imposed a financial penalty on Purple Frog for taking a fee of £175 from a tenant as a charge for arranging a novation of a tenancy at the tenant’s request. The tenant had agreed to rent a property jointly with several other joint tenants, but her plans changed, and she no longer required the accommodation.

The novation arranged by Purple Frog on behalf of the landlord had allowed the tenant to be replaced in a fixed-term tenancy and avoid paying any rent in respect of a tenancy she no longer needed.

NTSELAT argued that the Tenant Fees Act 2019 only permitted a maximum fee of £50, citing guidance on the Act published by the Government, and some decisions made by First-tier Tribunal judges.

At the appeal hearing the First-tier Tribunal Property Chamber heard evidence from Purple Frog’s founder and managing director Patrick Garratt and two other members of staff. Purple Frog’s witnesses identified the substantial work which had gone into preparing this ‘novation’ of the tenancy, and the efforts they had made to identify a reasonable and lawful fee for this service when the Tenant Fees Act 2019 was introduced.

Patrick Garratt also emphasised the benefit that tenants obtained from landlords and agents being willing, as Purple Frog was, to carry out the administrative work which permitted individual tenants to be released from fixed-term tenancies early. Purple Frog argued that NTSELAT’s preferred interpretation of the Act would make it more difficult for tenants to secure assignments and novation, since some landlords and agents would simply refuse to provide these services if they could not recover the real cost of doing so.

Anthony Gold’s Robin Stewart made legal submissions on behalf of the letting agents. The Tribunal decided that where a landlord or agent carries out a novation of a tenancy at the tenant’s request, the Tenant Fees Act 2019  does not limit the amount of the costs for a variation, assignment or novation to £50 but, instead adds a test of reasonableness should such costs exceed £50. The Tribunal considered the work done in respect of this specific novation and concluded that £175 was reasonable and less than the maximum which could have been charged. This meant that the fee was lawful, and the financial penalty had been wrongly imposed. NTSELAT have not sought permission to appeal.

This successful appeal follows a handful of cases where the judges in the First-tier Tribunal have applied the provisions in the Tenants Fees Act allowing landlords and agents to charge reasonable costs in quite different ways. In the absence of any binding Upper Tribunal case law on the Tenant Fees Act 2019, this detailed appeal decision, where both parties were legally represented and the ‘lead enforcement authority’ for the Tenant Fees Act was a party, is particularly notable.

The Tribunal’s judgment can be accessed here.