On the 1st June 2019 the government introduced legislation to make it illegal for landlords and letting agents to charge tenant fees. The new laws are designed to protect tenants from unfair fees and reduce the cost to tenants of moving between rented properties.
The new rules apply to all Assured Shorthold Tenancies (which is the most common type of residential tenancy), licenses to occupy housing (for instance, lodgers) and student lettings.
Even if your tenancy agreement was signed before 1st June 2019, as of 31st May 2020 you are not permitted to charge any non-permitted fees, for instance, check out or renewal fees.
What fees are permitted under the Tenant Fees Act?
Under the Tenant Fees Act all fees are prohibited unless the payment is expressly permitted. Under the Tenant Fees Act, the following fees are permitted. If landlords want to be able to charge these fees, they must be included in the tenancy agreement.
- The rent – this is the agreed amount paid by the tenant to the landlord to rent a property. The Tenant Fees Act does not permit a higher rent for part of the tenancy term. For example, landlords cannot charge £900 for the first month’s rent and then reducing the figure to £700 from month two onwards.
- Holding deposit – this is equivalent to one weeks’ rent to reserve the property and proceed with the tenant reference applications. This deposit can only be retained for up to 15 days, unless agreed otherwise in writing.
- Tenancy deposit – this is equivalent to five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above.
- Replacement of lost keys – if the tenant loses the keys to the property, the landlord can charge a “reasonable amount” to replace them. Landlords must be able to provide a receipt for the costs incurred.
- Late rent payments – if the rent is late by over 14 days, interest can be charged at 3% above the Bank of England base rate for each day from the date that the rent falls due until the date it is paid. Landlords can no longer charge for administration costs incurred by chasing late rent payments.
- Changes made to the tenancy agreement at the request of the tenant – landlords or letting agents are permitted to charge a sum of up to £50 to cover administration costs. If landlords want to charge more than this, they must provide written evidence that their expenses were more than £50. For instance, early termination fees can be equivalent to the loss of rent incurred. Landlords cannot charge for renewing a tenancy or making it longer.
What fees are banned by the Tenant Fees Act?
Any fees, except those outlined above, are now unlawful. Types of fees which landlords cannot now lawfully charge for include:
- Viewing fees
- All fees associated with setting up a tenancy, including credit checks, referencing, drawing up the tenancy agreement and preparing the inventory
- Check-out fees
- Third-party fees
- Gardening services
What does the tenant fee ban mean for landlords?
The tenant fee ban will reduce the income of landlords and letting agents. Landlords that use letting agents may find their fees increase as agents look to recover their losses. Landlords may in turn increase the rent they charge, although there has been little evidence of this happening.
Landlords may also cut back on making improvements to their properties as their profits are reduced. Many landlords may also choose to self-manage their properties, which may result in more breaches of property rules as landlords struggle to keep abreast of the legislation.
What is the risk to landlords of non-compliance?
Landlords and lettings agents who ignore the ban face an initial fine of up to £5,000. Those committing another breach within five years may be fined an extra £30,000 and could also be taken to court.
What should I do if I am charged a fee that I think is banned by the Tenant Fees Act?
If you are charged a fee that you do not think is legal, you should raise this with your landlord or letting agent. Professional letting agents will be aware of the legislation, if there has been a legitimate mistake, they should rescind the charge, or be able to show you why they are entitled to charge you a fee, for example, if you have lost the keys to the property.
We recommend that you always use a professional letting agents who are members of The Property Ombudsman (TPO) or The Property Redress Scheme. This gives you peace of mind that you have a clear route to resolve any complaints or issues.
Are deposits changing as part of the Tenant Fees Act?
The Tenant Fees Act caps deposits at five weeks’ rent, provided the annual rent is below £50,000. For properties with a yearly rental value of over £50,000, security deposits are capped at six weeks.
If your existing deposit is above this amount, your landlord must return the excess amount.
Landlords can no longer charge a higher deposit for tenants who have pets in the property. This may mean fewer landlords are willing to rent their property to tenants with pets.
If you have any further questions or require advice, please contact us here at Best Gapp and we will be happy to help.