What Does The Tenant Fee Ban Mean For Landlords?

The Tenant Fees Bill will bring an end to letting fees and save tenants around £240 million a year, according to government figures.

On Tuesday 2 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 1 June 2019 and will apply to both landlords and letting agents.

So how will it affect you as a landlord? Here is an overview:

 
Restrictions on Rent

There will be a ban on setting rent at a higher level for the first portion of the tenancy and then dropping it down afterwards. This is to prevent landlords or agents trying to offset the ban on fees by artificially increasing the rent for the initial period to make up the costs.

As a landlord you may wish to increase the rental amount that you would normally charge; and as long as this is consistent throughout the tenancy this will be fine. However, the government believes that tenants will shop around for properties with the lowest rental price.

Holding Deposits

A holding deposit is the amount a tenant currently puts down to secure the property they would like to rent, but haven’t yet signed a contract.

Within the new bill, holding deposits will be capped at no more than 1 week’s rent. The Bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.

Deposits

Deposits will be limited to a maximum of 5 weeks rent for tenancies where the annual rent amount is £50,000 or lower; and 6 weeks rent where the annual rent amount is greater than £50,000.

Changes to tenancy agreements

A tenancy agreement can normally only be changed if both the tenant and the landlord agree. The bill puts a cap on the amount that can be charged for a change to tenancy at £50; unless the landlord demonstrates that greater costs were incurred.

Agreed Fees

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
  • payments arising from a default by the tenant, such as replacing a lost key

This means that banned fees will include:

  • Charging for a guarantor form
  • Credit checks
  • Inventories
  • Cleaning services
  • Referencing
  • Admin charge
So, will the fee ban apply to older tenancies?

The answer is, not immediately. It will, however, apply to renewals of tenancies that arise after the Tenant Fees Act comes in to force. Then, after 1 year, the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective.

Financial Penalties

If a landlord or agency breaches the Tenant Fees Bill by taking a banned fee or payment, tenants will be able to get any money wrongly taken paid back via the county court. The landlord or agent may be charged interest on the amount 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.

If you are left with any further questions or wish to discuss your rental portfolio with one of our specialist, professional Lettings Consultants, call us on 01903 506040.

 

Sources:
http://www.arla.co.uk/lobbying/letting-agent-fees/england/
https://www.gov.uk/government/news/government-action-to-end-letting-fees
https://www.rla.org.uk/landlord/guides/tenant-fees-ban-guidance.shtml
https://www.parliament.uk/business/news/2018/may/tenant-fees-bill-commons-second-reading/

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