Sheriff court case concerning the meaning of “a premium” in the context of residential leasing.

Mr Cross and others (the students) sought a lease of property at Elmfield Avenue in Aberdeen. They completed an application form supplied by Aberdeen Property Leasing which revealed that the rent was to be £1,300 per month, and that a deposit of £1,300 and an “Admin fee” of £125 plus VAT thereon were to be paid prior to entering into the lease. The students paid the deposit and administration fee. In June 2009 they entered into the lease and were granted an assured tenancy of the property.

The students subsequently raised a small claims action seeking repayment of the administration fee which they argued was an illegal premium.

At the time the lease was entered section 82(1) of the Rent (Scotland) Act 1984 provided:

“any person who, as a condition of the grant, renewal or continuance of a protected tenancy, requires, in addition to the rent, the payment of any premium or the making of any loan (whether secured or unsecured) shall be guilty of an offence under this section”.

And s90 of the 1984 Act provided:

““premium” includes any fine or other sum and any other pecuniary consideration in addition to rent”

On 29 November 2012 s90[1] of the 1984 Act was amended by section 32(3) of the 2011 Act and now provides:

“”premium” means any fine, sum or pecuniary consideration, other than the rent, and includes any service or administration fee or charge.”

Aberdeen Property argued that the administration fee had been legitimately charged as, at the time the lease was entered into (i.e. prior to the amendments), administration fees were not prohibited.

The students argued that administration fees were prohibited at the time the lease was entered into and that the amendments made by section 32(3) of the 2011 Act simply clarified the meaning of “a premium”. They explained that the clarification was necessary because of confusion on the part of some landlords about what they could and could not charge and because of poor and inconsistent practices adopted by many landlords in relation to the imposition of charges and fees in addition to the rent and refundable deposit.

The sheriff agreed with the students’ interpretation and granted decree for repayment of the administration fee with interest:

“In my opinion the definition was not changed – it was improved to make it crystal clear to all involved in residential leasing that administration fees ought not to have been imposed and ought not to be imposed. The administration fee imposed by the defender is “a pecuniary consideration in addition to the rent” (s90 of the 1984 Act – prior to amendment). I asked [Aberdeen Property’s representative] if she could explain to me what the administration fee of £125 could possibly be if not “a pecuniary consideration in addition to the rent”. She has yet to answer that question. I have concluded that the administration fee imposed by [Aberdeen Property] was a prohibited payment and accordingly the pursuers are entitled to the return of it.”

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.