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A fixed-term 6 month joint AST agreement ends in April 2020. The agreement had three tenants listed on it. One tenant is leaving (former tenant) two are remaining.

The former tenant notified the Letting Agent 2 months prior to the tenancy agreement ending that they would be leaving the property. The two remaining tenants have found a replacement tenant and notified the Letting Agent that they had found a replacement tenant.

The Letting Agent has requested the new tenant pay a "Tenant Replacement Fee". The new tenant queried this as the Tenant Fee Act 2019 permits letting agents to charge up to £50 for a "variation, assignment or novation of a tenancy", however as the agreement ends prior to them moving in, they feel that this does not apply and that it is classed as a tenancy renewal. The Letting Agent says they can charge thebfee regardless of the tenancy ending as the former tenant is being replaced.

Under the Tenant Fee Act 2019 a Letting Agent can not charge fees for setting up nor renewing contracts.

Is the tenant or the Letting Agent correct? Is a Letting Agent permitted to charge a "Tenant Replacement Fee" at the start of a new contract?

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In my non-expert opinion, I believe the letting agent is correct.

As far as I can tell, a renewal is limited to making a new tenancy agreement with the same tenants. From Shelter's website:

Changing or assigning your tenancy

You can be charged £50 if you want to change a term in your tenancy or assign it to someone else. The landlord can only charge above this if they can prove it cost them more.

I've been unable to find a clear definition of the term "renew", either in legislation or in the official guidance. However, it appears to be consistent with the definition of "replacement tenancy" in section 21 of the Housing Act 1988 (as amended):

(7) For the purposes of this section, a replacement tenancy is a tenancy—

(a) which comes into being on the coming to an end of an assured shorthold tenancy, and

(b) under which, on its coming into being—

(i) the landlord and tenant are the same as under the earlier tenancy as at its coming to an end, and

(ii) the premises let are the same or substantially the same as those let under the earlier tenancy as at that time.

So as with the implied definition of "renewal", a change of tenant results in a new tenancy, not a replacement of the old one.

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    Thank you for looking into this. The way that I interpret this is that if the original three tenants had remained on the contract it would be classed as a replacement tenancy. As the tenancy terminates in April 2020 and a tenant is being replaced would this not class as a new tenancy? At which point the Tenant Fee Act states that it is not permitted to charge to for setting up a tenancy agreement. Or would this be classed as a novation to the original tenancy? Shelter
    – Gnemsid
    Apr 24, 2020 at 11:06
  • @Gnemsid: as far as I can tell, it would probably be a novation, yes. If the old tenancy is effectively being surrendered and replaced, then that certainly is. However, you make a good point that if the tenancy is being replaced at the end of the fixed term, then in theory no surrender is taking place. The Tenant Fees Act is new enough that there are still grey areas, and this may be one of them. I've been unable to find a definitive answer for this.
    – Steve Melnikoff
    Apr 24, 2020 at 11:20
  • Agreed, this is a grey area, had this been a change mid-tenancy it would have been much clearer! After doing some digging around, according to Section 2 C on OpenRent's website fees for changing a contract do 'not apply to renewals or changes to the length of the tenancy'.
    – Gnemsid
    Apr 24, 2020 at 11:40

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