A shocked landlord has revealed on social media that their letting agency illegally deducted its ‘tenant finding’ fee from the tenancy deposits of the renters involved.

This was 20% of the first month’s rent at both properties, which the agency took from the deposit, asking the landlord to ‘top it up’ before protecting it within a government-approved scheme.

After challenging the firm, the landlord was told this was ‘standard practice’ and, in frustration, took to social media (main picture, inset) to wonder aloud whether this was ethical.

Fraud

But private rented sector mediation expert Julie Ford (pictured) has warned any letting agency involved in such activity that by doing so they could be prosecuted for ‘fraud by false representation’.

“Deducting a fee owed to the agent by the landlord from the tenants deposit is wrong but subsequently telling the landlord that they now have to top-up the tenants own money before protecting the deposit is just outrageous,” she says.

“Money paid to the landlord as rent is the landlords’ money, so the agent would be entitled to deduct their fees from the first month’s rent for example,” she says.

“But the tenancy deposit is not the landlord’s money, it is the tenant’s money at all times throughout the tenancy and remains so until the landlord can provide reason why they wish to make a deduction for damage/dilapidation or rent owed when the tenancy ends.

“When an agent deducts their fee directly from the tenants deposit they have committed an illegal act called fraud by false representation.

“This is because they have deducted a fee owed to them by someone else from the tenant who doesn’t owe them the fee.”

Fraud by false representation is the act of dishonestly making a false representation to make a gain or cause a loss for another individual.

Thin ice

“The agent in this case is on very thin ice indeed, as the act of fraud by false representation is a criminal offence which holds a maximum sentence of 10 years imprisonment and a fine.

“A court will deal with matters of this severity. In minor cases, fraud convictions can lead to a smaller fine or community orders.”

Ford adds that situations like this should not occur as agents should know at a very basic level that a tenancy deposit is a ring fenced fund that is not available to them for their fees.

“The introduction of RoPA and the full regulation of agents cannot come quick enough and I sincerely hope that it sees agents such as this put out of business some day,” she adds.