Referral fees for letting agents: what the rules actually say

Since 1 June 2019, letting agents in England cannot charge tenants for much beyond rent, deposits (capped at five weeks' rent below £50,000 a year), holding deposits and a short list of defaults; breaches carry fines up to £5,000, rising to £30,000 or prosecution for repeat offences within five years. Wales has its own near-equivalent ban. Here is what neither Act touched: money flowing to the agent from third parties. A contractor paying 10% commission on maintenance work, an insurer paying per referred landlord policy, a conveyancer paying for sales referrals — all still lawful. The distinction is the payer. A 'referral fee' quietly loaded onto a tenant's bill is a banned fee wearing a costume, and Trading Standards has shown no patience for costumes.

Two regimes demand openness. The Consumer Rights Act 2015 requires letting agents in England and Wales to display a full tariff of fees prominently in the office and on the website — with breaches attracting fines up to £5,000 per office. And the 2019 National Trading Standards guidance on referral fees, written for both sales and letting agents, expects disclosure of referral arrangements to the consumer, including the amount, before decisions are made. That reaches the landlord side hard: a landlord choosing your recommended contractor deserves to know you take 10% of the invoice, because that fact bears directly on whether the £480 repair quote is really the best available. Undisclosed, it is a misleading omission under the Consumer Protection from Unfair Trading Regulations 2008. Disclosed, it is just commerce.

Landlords generate financial referrals constantly — rent guarantee insurance, buy-to-let remortgages, tax planning around incorporation, eventually estate planning for a portfolio. An agent can introduce a landlord to an FCA-authorised broker or adviser and take a fee for it. The perimeter rule is the same one that binds estate agents: introductions are fine, advice is not. Recommending that a landlord switch mortgage products, or opining on whether to hold property in a company, is regulated or reserved territory belonging to authorised advisers and qualified accountants. The safe sentence is always a handover, never a conclusion. And note one asymmetry worth respecting: insurance distribution has its own FCA regime, so agents actually arranging policies — not merely introducing — generally need authorisation or a proper appointed-representative arrangement, not a nod and an invoice.

The operational fix is small. Maintain one schedule listing every referral arrangement the branch has: counterparty, trigger, amount or percentage, date last reviewed. Disclose from that schedule — in the terms of business for landlords, and at the point of referral for anything ad hoc. Log each referral as it happens: who, to whom, when, for what fee, disclosure attached. Twelve months from now, that log answers every question a Trading Standards officer, a redress scheme, or an annoyed landlord could ask, in about ninety seconds. Agents rarely get in trouble for the £75 they took from a contractor. They get in trouble because the first anyone heard of the £75 was in a complaint, and by then the number had stopped being the point.