Are you a landlord or tenant confused about the Tenant Fees Ban Act 2019? We answer your most frequently asked questions regarding the Tenant Fees Act and look at its impact on the rental market.
What is the tenant fee ban act?
The Tenant Fees Act 2019 came into effect on 1st June, curtailing the fees that landlords and letting agents can charge their tenants. 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.
Why has the tenant fee ban been introduced?
Tenants have been charged unfair fees every time they rent a new property and sign a new tenancy agreement.
Traditionally, there are many fees a tenant needs to consider, including credit checks, reference checks, tenant agreement fees, inventory fee and other admin fees.
The Tenant Fees Ban Act has been introduced to keep rent and fees fair for tenants.
How does the tenant fee ban affect landlords?
Letting agents will look to recoup their costs, previously covered by tenant fees, by increasing the fees they charge landlords. Landlords may, in turn, increase the rent they charge, but this could result in more void periods.
Landlords may also try to reduce costs in other areas, for instance, by cutting back on refurbishments.
Landlords who previously used letting agents may choose to self-manage their properties, resulting in breaches of property law as they struggle to keep up to date with property legislation.
What is the risk of non-compliance?
Landlords and estate agents who ignore the ban face an initial fine of up to £5,000. If the breach is committed again within five years, the maximum fine increases to £30,000. It is up to Local Trading Standards to enforce the tenant fee ban.
What fees have been banned?
Landlords and letting agents cannot charge tenants any fees unless expressly permitted under the Tenant Fees Act 2019. This means that tenants can no longer be charged for:
- Viewing properties
- Reference or credit checks
- Admin fees to cover things like referencing, credit checks, immigration checks or guarantor checks
- Check-in and check-out fees, including the inventory
- Renewing the tenancy
What can tenants still be charged for?
Before the letting fees ban, landlords and letting agents could charge unlimited fees. Now all fees are prohibited except for rent, deposits and the following three exceptions. Even these permitted fees and deposits are capped – more on deposits later.
Late rent fees
Rent payments more than 14 days overdue are considered late. Landlords are permitted to charge up to 3% more than the Bank of England base rate (currently 0.75%) for each day that the rent payment is late. But, landlords cannot charge for admin costs associated with chasing late rent.
Landlords can charge to replace lost keys. However, this must only be to recover the cost incurred. Whoever is charging the fee must be able to provide a receipt.
Contract changes requested by tenants
If tenants request a change to the contract, for instance, adding a permitted pet, landlords can charge a fee of up to £50. To charge a fee above this amount, landlords or letting agents must demonstrate the costs they incurred.
Tenants cannot be charged for renewing or extending their tenancy agreement.
Cap on deposits
The Tenant Fee Act places caps on both tenancy and holding deposits.
Holding deposit cap
Holding deposits are limited to the equivalent of one week’s rent and must be returned to the tenant – either directly or by being deducted from the security deposit or first month’s rent.
Landlords can only retain a holding deposit if:
- the tenant withdraws
- the tenant fails a right to rent check
- the tenant provides false information or misleading information pertinent to granting the tenancy – for instance, lying about their income
Tenancy (security) deposit cap
Tenancy deposits are capped at five weeks rent for properties with an annual rent below £50,000 or six weeks rent if the annual rent is more than £50,000.
What if my deposit for my current property is above the deposit cap?
If your tenancy deposit is above the maximum limit, then your landlord should reduce your deposit according to the new regulations set out in the Tenant Fees Act 2019.
Can I be charged a holding deposit to secure a property?
A landlord or letting agent can charge a holding deposit to reserve the property, but they cannot charge more than one week’s rent. The holding deposit can only be held for 15 days, unless another date is agreed upon in writing.
After this date, the holding deposit must be returned within seven days. This can be repaid back to the tenant, added as a credit to the first rental payment or security deposit. The landlord or estate agent can hold onto the deposit, if the tenant decides to withdraw or fails the reference checks or provide misleading information during the tenant check stages.
Can landlords or letting agents charge a higher rent for part of the tenancy?
No, landlords and letting agents cannot recoup their administration fees by charging tenants more for the first month’s rent. However, you can still include bills in the rent for the following utilities, such as council tax, gas, water, electricity, TV license and other communication services.
What should I do if I think I have been wrongly charged?
If you think you have been charged a prohibited fee, first raise it with your landlord or letting agent. They should be able to demonstrate why they are permitted to make the charge. For instance, if you are being charged for losing your keys, they should show you a receipt for the costs they incurred.
If you are not satisfied with the response from your landlord or letting agent and still believe you have been charged an illegal fee, you can apply to the First Tier Tribunal. Citizens Advice or the Leasehold Advisory Service can offer help in this situation.
Has rent increased since the tenant fee act was introduced?
Before the introduction of the Tenant Fees Act in June 2019, a sizeable proportion of letting agent’s income was from tenant fees. To recover this, agents have slightly increased the fees they charge landlords. Landlords may seek to recoup this additional cost by increasing rent.
At first glance, the data seems to support this. The HomeLet Rental Index for June 2021 shows that the average monthly rent in the UK is at an all-time high of £1,007. Almost 6% higher than the same time last year and 9% higher than back in June 2019 when the Tenant Fees Act was introduced.
However, landlords can only increase rent if the supply and demand in the local rental market permits it.
If you have any further questions or require advice, please contact us here at Best Gapp and we will be happy to help.