Legislation

Legislation

TENANT FEE BAN

Changes to Landlords' Charges

Back in May 2018 the Government introduced the Tenant Fees Bill to Parliament, it was announced on 15 January 2019 that the Tenant Fees Ban will come into force on the 1st June 2019. The Tenant Fees Act received Royal Assent and became law on 12 February 2019

Examples of banned fees for tenants -

  • Referencing
  • Credit checks
  • Check-ins/checkouts
  • Domestic cleaning services
  • End-of-Tenancy professional cleaning
  • Having a property de-flead after allowing pets in the property
  • Administration costs
  • Gardening services
  • Renewals

Exemptions from the banned list -

  • Rent
  • Holding deposits
  • Security deposits (but now reduced to a maximum of 5 weeks' rent)
  • Charges for defaulting on the contract

However, all four are subject to additional restrictions as part of the legislation and landlords and agents will need to be mindful of these changes.
Finally, landlords may charge for changing tenants or allowing tenants to vacate the property early. This is subject to restrictions on costs, however.

What can we charge for?

Alongside rent and deposits, agents and landlords will only be permitted to charge tenants fees associated with:

  • A change or early termination of a tenancy when requested by the tenant
  • Utilities, communication services and Council Tax
  • Payment of damages where the tenant has breached terms in their tenancy agreement
  • Payments arising from a default by the tenant where they have had to replace keys or a respective security device, or a charge for late rent payment (not exceeding 3% above the bank of England base rate)



Changes to the tenancy

While most costs related to assignment or surrender of a tenancy are prohibited, landlords and agents are still allowed to charge certain small sums to tenants if the tenant requests a change in tenant or an early surrender.
Where the tenants have requested early surrender of the tenancy, the landlord or agent may charge fees equivalent to the loss incurred. As charges such as referencing, tenancy drafting, etc are prohibited landlords will not be able to show a loss has been incurred for the provision of these services. Instead, landlords and agents will be able to charge the equivalent of the rent lost due to the unforeseen void period. As the void period may not be clear at the point of charging many landlords and agents will likely start to regularly refuse tenants looking to surrender early as a result.



What are the financial penalties for ignoring the ban?

Where a breach has occurred and a banned fee or payment is taken, tenants will be able to get any money wrongly paid back via the county court. Local Trading Standards are supposed to assist tenants with this in some fashion once it comes into force.
The landlord or agent may be charged interest on this from the day that the prohibited payment was taken.
In addition, local trading standards will be required to enforce this legislation and will issue a fine of up to £5,000 for a first offence. Subsequent breaches are criminal offences or alternatively, the landlord can be fined up to £30,000 as a civil penalty and be subject to a banning order.



Will you be restricted from serving a Section 21 notice if I charge fees?

Yes.

No Section 21 notice may be given so long as a prohibited payment was requested, paid by a tenant and is still being held by the landlord or agent.
Landlords and agents can either refund the prohibited payment or, with the permission of the tenant, use that money as payment towards rent or the deposit.



Deposits

Deposits will be limited to the equivalent of 5 weeks' rent as a maximum amount for tenancies where the annual rent is below £50,000.
Deposits for tenancies where the annual rent is £50,000 or more are limited to the equivalent of 6 weeks rent.



What tenancy types does this legislation apply to?

Only ASTs, student accommodation, and licences are caught by this. Company lets and non-assured tenancies will be exempt.



What you need to be thinking about before the ban comes in

Landlords and agents will have to consider their current business models carefully. The prohibition on fees will impact heavily on some business models and this is likely to lead to increasing rents or heavier costs to the landlords.
Similarly, it is vital that landlords and agents consider whether their current tenancy agreements and holding deposit forms are fit for purpose once the new legislation comes into force. The RLA will be updating our documents to ensure compliance with the ban on fees prior to it coming into force. We would urge any of our members to use the new documents once they are published.

The above guidance is based on the current draft of the Tenant Fees Bill.

Until the 1st June 2019, we will continue to charge tenants for their Tenancy Agreement, referencing, renewals, tenant replacements and checkouts. After that, we will no longer be able to do so.



If you have any queries relating to the above changes, please do not hesitate to contact us.