/ Tenancy deposit vs "service charge"

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jonny taylor on 11 Dec 2012
I have got myself into a rather worrying situation with a flat I am interested in renting. I won't name the agency or city for now at least, but it's in Scotland which may well be relevant. This will probably all make me sound rather naive - I thought I was pretty cynical about letting agents but it seems I may have taken my eye off the ball. I am hoping the always-reliable UKC brain trust may be able to give me some useful advice.

This is a bit of a long one, but I would be really grateful to anybody who can offer any solid advice about what I should be doing about all this.

The story so far:
- Viewed flat today, liked it
- Rang agency to indicate interest, suggested I come down to office, woman said she could take my details over phone and confirm landlord's approval
- She phones back later to confirm it's ok and to take £250 holding deposit. As she is taking payment (debit card, damn...) she suddenly remembers that "this landlord does things differently" and that it is actually a "service charge".
- I start asking questions about this. e.g. does this go into DPS or equivalent. Apparently no it doesn't.
- I suggest this sounds illegal, she says it is fine and "our lawyers have confirmed its ok" (!!)
- She insists it serves as a deposit, and is returnable at the end of the tenancy assuming there is no damage etc.
- They have my money...

Now, the more I think about this the less I like it and the more I am annoyed at myself for not doing due diligence on the agency and landlord. Any of the above that has come from her may of course be lies. Other information I have:

- The agency is only acting as a finder, not ongoing management, the landlord will be responsible for the tenancy
- The landlord (or company?) apparently has a large number of properties in the city
- As far as I can tell from their website the agency may not be registered with any ombudsman or suchlike, only the "scottish association of landlords" which is not an ombudsman. I didn't even think to check that beforehand...
- I have not visited the agency's offices. Google street view shows a shopfront "to let" at that address, so at best they are a new outfit or have recently moved. They claim to be run by a guy who was a founding partner of another city agency that I believe is legit.
- Paranoia overload: when I arranged the viewing I also arranged to view another one on their books 3 doors down. When I viewed the first one the guy told me they hadn't been able to get the keys for the other so I couldn't see it. I have been amazed how often that has happened with other agencies when I have been viewing, but the ultra-paranoid part of me does wonder whether the other flat exists.

As a friend pointed out, isn't it illegal to charge fees associated with setting up a tenancy in Scotland? Rather suggests this may be sailing close to the wind legally speaking whether it is a deposit (not in DPS...) or a fee (illegal?)...
This quantity also looks and sounds suspiciously like it might even be the finders fee that the agent charges the landlord, which raises additional questions about me paying it and the odds that I will ever see it again.

Tomorrow I plan to contact the agency asking for
- Name of landlord and company
- Copy of contract in advance
- Written confirmation of arrangement re this "service charge"
Is there anything else I should be looking into?

I also plan to contact CAB & property ombudsman asking if they have any comments on the legality/dodginess of the arrangement.

Random thought: do distance selling/cooling off regulations apply to the money they have charged my card for this not-a-deposit, I wonder?

Basically I would like to take the place, but I am concerned that this is all very fishy and does not bode well for how the tenancy will go. I have dealt with ruthless agencies/landlords, but finding myself dealing with ones that might possibly be borderline illegal is an unfamiliar and unexpected experience. There is always the option to walk away and (probably? possibly?) lose my non-deposit if this all really does look like a Very Bad Idea.

If anyone can give any concrete advice on all the stuff above, that would be massively helpful right now as I am completely at a loss as to how to handle this. Thankyou...
TheHorroffice - on 12 Dec 2012
In reply to jonny taylor:

Sounds like a pretty standard admin/holding/service charge to me. I wouldn't expect to get it back, next time go through Gumtree to skip these sorts of charges..
jonny taylor on 12 Dec 2012
In reply to TheHorroffice:
Can I be frank and ask if you actually know what you're talking about?
This information here strongly suggests to me that what they are doing is illegal:
Do you say "I wouldn't expect to get it back" because you think I would get sick of following the legal process, or because you think it is actually legitimate?

If this is completely legitimate then I don't have too much of a problem with it, in England that's a fact of life unfortunately, however in Scotland this doesn't seem right to me.
Fraser on 12 Dec 2012
In reply to jonny taylor:

What "service" is the landlord providing for this charge? You'd pay the rent, he / she provides the flat. End of. Sounds to me like you'll be waving bye-bye to this sum of money. I'd move on - there'll always be somewhere else minus this complication.
James Malloch - on 12 Dec 2012
In reply to jonny taylor: Service Charges/Admin fees have been quite standard at some places that I've looked at. They've only been around £50 for me but that's in a shared house...
jonny taylor on 12 Dec 2012
In reply to James Malloch:
In scotland?
Neil Williams - on 12 Dec 2012
In reply to James Malloch:

Can only speak for England, but service charges for rentals are normally just an admin fee for the agency (payable to them, not the landlord) and would tend not to be that high.

This sounds rather illegal to me - it sounds like this landlord is calling the deposit a service charge to avoid having to use one of the tenancy deposit protection schemes mandated by law.

If that is indeed what he is doing (I would ask him very explicitly that question - perhaps worded as "When will you take the tenancy deposit, as I assume this is not it?") I would run a mile, as it would raise the question of precisely what other requirements he would also circumvent, and precisely what other responsibilities he would avoid.

EeeByGum - on 12 Dec 2012
In reply to jonny taylor: It sounds a bit dodgy to me. After all, is sounds like this "service charge" is acting as a deposit in all but name and legalities. Some agencies do charge you up front for credit checks and the like which I find reprehensible. The other lesson to learn is not to hand over cash until you have something signed and sealed. I take it you don't even have a receipt for the transaction?

If you do go through with the deal though, make sure you photograph every inch of the flat before you move in and make sure that every mark, blemish, state of the window's cleanliness - everything is documented on the inventory.
jonny taylor on 12 Dec 2012
In reply to EeeByGum:
I do have a receipt from the agency, which is something.

Agree to definitely be wary about inventory/photographs etc. In that respect it is good that the flat is unfurnished.

Still investigating and trying to come to a decision over all this. Not sure how the scottish requirement for landlord registration works with shell companies and suchlike: I now have a name and company from the letting agency but I can find no reference whatsoever to the company on the internet, and the registered landlord for the property doesn't match the name I was given. That may be "normal" though, waiting to hear back from council.

And yes, I now have non-legal advice that "It does not matter what she chooses to call it but monies taken at the beginning of a tenancy and returned at the end is a deposit and thus has to be deposited to one of the 3 schemes approved by the Scottish Minister".

If I could find another place I liked easily, this might be an easier decision, but I've now been up on two visits to do viewings and it's been a right hassle and time is getting short now. What to do, what to do...
Martin W on 12 Dec 2012
In reply to jonny taylor: Have you tried contacting Citizens Advice Scotland? There seems to be a separate web site for the direct contact service: - they offer phone, e-mail or web chat.

The first link you posted seems quite clear that the monies you have paid now should be converted in to a properly protected tenancy deposit, or else returned to you and a protected tenancy deposit taken instead.

The Shelter web site linked from your Citizens Advice link could hardly be clearer! It says in BIG red letters: "Letting agent fees are unlawful in Scotland" - just in case you hadn't understood "Any fees charged by the landlord to create or renew a tenancy are illegal" on the Citizens Advice web site.

Given the apparent discrepancies in the information you have now been given about the identity of the landlord, I'd be starting to have serious reservations about this whole affair. I can understand that it's difficult if you have to travel to view properties but how happy are you going to be living in a place with the constant feeling that the landlord is trying to rip you off? Do you have a fixed deadline to get moved in eg starting a new job? Even then, you could consider putting the bulk of your stuff in to storage for a few weeks and B&B/hostel it until you find somewhere proper to live. (Some employers will help find temporary accommodation for new staff, sometimes even other folks in the same company will put you up as a lodger for a while.)

This is quite interesting to me because a relative recently had to back out of a tenancy at the last minute when their property sale fell through, and they lost a 'deposit'. It hadn't occurred to me that it might be recoverable. I shall suggest that they get advice on that.

Good luck with getting settled in, wherever you end up.
jonny taylor on 12 Dec 2012
In reply to Martin W:
Thanks for your reply Martin. I am certainly coming round to that conclusion. Luckily the university will cover temporary accommodation should it be necessary - not ideal, but certainly helpful as a safety net.

The agency woman got back to me this morning:

> Further to my email below, I have made an error in charging you £295.00 for the Service Charge

ok promising so far, but she continues...

> I should have charged you £350.00. My apologies for this error

That is (a) probably the final straw for me and (b) probably yet another way out for me, since they are changing the terms of our verbal contract after the fact. With luck if I offer them the chance to save face they will take it. Will leave it a bit longer to hear from citizens advice scotland first though - I emailed them last night and may try phoning later...
EeeByGum - on 12 Dec 2012
In reply to jonny taylor:

> That is (a) probably the final straw for me and (b) probably yet another way out for me, since they are changing the terms of our verbal contract after the fact.

Agreed - run away whilst you still can!
Bernard Shakey on 12 Dec 2012
In reply to jonny taylor:

I am a Landlord in Wales, I put the deposits, (which is just over a months rent) into the DPS, on a recent Landlord course I attended, I was amazed how many landlords didn't use the DPS, they got round this by not calling it a deposit but an Amin / or service charge, apparently legal.
Neil Williams - on 12 Dec 2012
In reply to Bernard Shakey:

But morally disgraceful, and I would run a mile from any landlord that said they were going to do that. You would only do it if you intended to use it to your pecuniary advantage.

I like the Swiss approach - you set up a deposit-based bank guarantee, and both signatures (landlord and tenant) are required to make any withdrawal from it.

Bernard Shakey on 12 Dec 2012
In reply to jonny taylor:

Thats sort of how the DPS scheme works, the deposit goes into an account which requires codes from both the tenant and landlord,
JH74 - on 12 Dec 2012
In reply to jonny taylor:

Concrete advice I unfortunately cannot give but I agree that it sounds rubbish/dodgy and a good possible first port of call is the CAB Scotland. They should be able to tell you quite quickly just how reasonable or shady it sounds.

Best of luck with it. In so far as 2nd post goes I thought Gumtree was where this possible scam (I have heard of it before) started.
jonny taylor on 12 Dec 2012
In reply to JH74:
Sadly CAB scotland are refusing to speak to me as I'm not from Scotland (they are deducing this from the incoming phone call...). I doubt CAB england will know the ins and outs of scottish housing law.

However, it seems the city council in question are very interested in the whole thing, both the name discrepancy and the fee side of things, I am hopeful for some firm comment from them tomorrow morning - I get the impression they are just triple checking before they confirm unlawfulness...
cuppatea on 12 Dec 2012
In reply to jonny taylor:
> (In reply to JH74)
> Sadly CAB scotland are refusing to speak to me as I'm not from Scotland (they are deducing this from the incoming phone call...).

Do they have caller ID or is it your English accent?

Maybe phone again from a mobile, or put on a Scottish accent ;-)
jonny taylor on 12 Dec 2012
In reply to cuppatea:
I presume geographical information on the incoming phone call, it just played a recorded "piss off sassenach" and hung up on me. I thought about trying from a mobile, but couldn't be bothered with making up a scottish address if they asked me, and that sort of thing!
Talius Brute on 12 Dec 2012 -
In reply to jonny taylor:

Jonny, have you seen this?

The law recently changed in Scotland (very recently - Nov) people can't charge "service fees".

I haven't checked the legislation and the penalties, but I assume there will be consumer rights of redress arising from it, so worth looking into.

Worth seeing this as well:

Clearly companies trying to get round the tenancy deposit scheme.
Talius Brute on 12 Dec 2012 -
jonny taylor on 12 Dec 2012
In reply to Talius Brute:
Thanks for those links, very helpful. What I haven't quite worked out is what was the situation before? Was there no deposit protection at all? (i.e. a fair few years behind england in that regard). It seems that the Rent (Scotland) Act 1984 attempted to outlaw fees, but the very recent changes have been an attempt to close perceived loopholes in that if I understand it correctly.

If all or some of this really has *just* come on the scene then I would be more open to cutting the agency/landlord some slack, though one would still think they should know better. It might change my view of them from "blatant cowboys" to "a bit disorganised" though, which would be a big difference from my point of view I think - assuming of course they did then agree to submit it to DPS. Perhaps I should think about taking that line with them...
Talius Brute on 12 Dec 2012 -
In reply to jonny taylor:

Whether or not they should know better, or it's a forgiveable mistake, doesn't seem to matter to me. You should still get the money back. If someone decides to enter an industry, particularly one which has a role in advising normal people, then it's their responsibility to know what the rules are.
jonny taylor on 12 Dec 2012
In reply to Talius Brute:
Yeah, I agree with that completely, and about should still get the money back.

What I was thinking though was if they agreed to convert the money into a "real" deposit, and the messing about could be put down to issues with a transition to the new set of laws, then that might make me more comfortable going for the flat rather than trying to back away as fast as I can from the situation. It's not like *any* agents I've ever dealt with are completely whiter than white...

On the other hand her statement that "their lawyers" have approved the current situation maybe makes more sense in light of the recent changes, but might mean they still back themselves to weasel their way out of the new laws in some way, in which case I don't want anything to do with them.

Will see what they have to say for themselves tomorrow...
jonny taylor on 13 Dec 2012
In reply to jonny taylor:

Mismatch of names: turns out they told me the wrong flat number! All matches up now, so that's that one solved...

Deposit/service charge: this is fascinating, they are absolutely not backing down on this one. As far as I can tell:
(a) the verdict appears to be pretty unanimous that this is illegal
(b) I think they are *far* from the only people to be carrying on like this regardless.
(c) could be an education trying to get it back at the end of the tenancy! It seems people have been successful through the small claims court.

Don't know whether landlords are holding out for the law to be overturned or something, but it's all kind of curious. I know a huge amount more about all this than I did 48 hours ago (thankyou to those on this thread who have helped...), and perversely I'm a lot less concerned that this particular guy is any *more* dodgy than your average commercial landlord.

Rightly or wrongly, I think I'm going to go with it...!
itsThere on 13 Dec 2012
In reply to jonny taylor: you cant do that in scotland, you can then
A) rent flat then take them to court when you dont get your money back, you will win
B) find another landlord

you will get the money back under scot law
itsThere on 13 Dec 2012
In reply to itsThere: sorry for the spam or similar post
if its not a deposit you can get it back
jonny taylor on 13 Dec 2012
In reply to itsThere:
Yeah, I understand the situation wrt that. I'm going to enjoy renting the flat for however long the tenancy ends up lasting, and then intend to go through that process when I move out if it is not returned.
itsThere on 13 Dec 2012
In reply to jonny taylor: you can also wait till they say nothing is broken, in writing. then get all your money back and they cant take any for "cleaning costs" which they wont have any proof of
Conf#2 on 15 Dec 2012
In reply to jonny taylor:

The law has been around for ages but it's been buried, and we've just been through a big legal battle to get it declared and confirmed by the government.

It is illegal, and the law will not be overturned. But even though it's been illegal for ages when I was sorting the rent for the flat I'm in (just over a year ago) the landlord was saying that it was legal (which I argued against, and won). It's in their interest.

But because of the burying folk have just paid it, especially because it's legal in England and no-one knew better.

Now, in terms of moving forward.

These guys have some good info:
And they give good info on how to get the money back, what documents to keep hold of etc.

Here is some more info.

A few of my friends are getting theirs back at the moment (woth varying degrees of success).

Best of luck!

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