10 things agents should know about disclosing referral fees and commissions

What do you have to disclose to your landlords and tenants when it comes to your charges and any commissions you earn from referrals? In a word, everything. Letting agents have certain legal obligations, including the need to comply with consumer protection law when dealing with landlords and tenants.  This means disclosing all the fees they charge landlords and all the costs associated with letting a property for tenants. We’ve put together a quick guide your obligations - check out gov.uk for more detailed information on complying with the law or refer to an industry organisation such as ARLA Propertymark for legal advice. 

• You need to provide your landlords with information about all of your fees that is full, accurate and not misleading, so your potential landlords know how much it will cost to use your services. All non-optional fees and charges should be set out up front. All of your fees should be quoted inclusive of VAT.
• You will need to display all of your fees prominently, both in your office and in all of your advertising. 
• Your advertising should include all of the non-optional fees that your landlords will have to pay and indicate clearly where they can find further information about any variable or optional fees.
• You can’t provide information about some of your charges and not others, or only reveal your charges gradually.
• Any descriptions of your services should also accurately reflect the way you charge for them, for example, if you charge a specific percentage for a comprehensive management service but there are extra charges for aspects of that service, you need to disclose what these extra charges are. It could also be misleading to describe a service as let-only if you charge a commission from your landlords for renewals and don't disclose this.
• Any fees that are genuinely variable or optional should be clearly set out and brought to the attention of a potential landlord early on - you can’t just put them in your small you need to clearly explain what factors affect the variability and how they are calculated.
• You also need to disclose landlords all charges that prospective tenants will have to pay.

What your tenants need to know about costs and commissions

• You need to provide your tenants with information about any charges that is full, accurate and not misleading, which includes all of the permitted payments under the Tenant Fees Act. All charges should be quoted inclusive of VAT.

• You will need to display all of your fees prominently, both in your office and in all of your advertising. You’ll need two sets of fee schedules for your tenants until 31st May 2020 - one for tenancies agreed and executed after 1st June 2019 and one for tenancies entered into before the ban, to which your old fees will still apply until 31st May 2020.

• If you are earning referral fees or commissions from a third-party provider from which your tenant is purchasing optional products or services, it is considered best practice to be transparent with your tenants about the fact you will earn a referral fee or commission from the purchase of that product or service.

It's important to note that this article is intended as a guide only. It isn't exhaustive and doesn't constitute legal advice.