From June 1st, 2019 landlords and letting agents cannot ask renters for fees if they want to rent in the private sector in England. This comes as a result of the Tenant Fees Act, which includes Assured Shorthold Tenancies, tenancies of student accommodation, and licenses to occupy housing. This change will impact landlords; however, the full effects are yet to be determined.
Firstly, it is important to understand what the aim of this act is. According to the UK Government and the newly implemented laws, the aim of this act is to reduce the high costs tenants face during their tenancy.
What has changed?
You can no longer ask a tenant to make specific payments that are related to the tenancy. This includes any administration fees, referencing fees, charges for inventory makes, check-ins and check-outs, charges for professional cleaning, renewal fees, along with other charges that make the moving process harder for tenants.
What can I charge the tenant?
According to the Guidance for Landlord and Agents, as a landlord you can charge the following permitted payments:
- The rent which represents an amount the tenant has to pay on a regular interval. This amount has to be even in each period of payment.
- A refundable tenancy deposit worth no more than five weeks’ rent (if rent is less than £50,000 annually) or six weeks’ rent (if rent is more than £50,000 annually). The deposit has to be protected by a Government-backed tenancy deposit scheme, and the tenant has to be served the prescribed information relating to the scheme provider where the deposit is protected.
- A refundable property holding deposit worth no more than a weeks’ rent if you want the tenant to demonstrate their dedication towards taking up a tenancy at the property. You are only allowed to accept one holding deposit per property at a time.
- A payment to change tenancy, if the tenant requests it and consent from the landlord is given. This payment is capped at £50 or more based on the circumstances if it justified.
- A payment associated with early termination of the tenancy, if the tenant requests an early termination of the contract and consent from the landlord is given. However, the amount you as a landlord can charge should not exceed your financial loss or reasonable costs incurred by the agent.
- Utilities, Communication services, TV license, and Council tax. The renters are still required to pay the bills agreed upon the tenancy agreement.
- Default fees for late rent payment which is more than 14 days overdue or for the replacement of lost keys and locks where it has been written in the signed tenancy agreement.
The Act does not affect any entitlement to recover damages for breach of contract.
If the fees you give to your tenant are not part of this list, you are prohibited from charging them. Charging illegal fees can cost you a fine up to £5,000 for the first offence. If the same offence is caused again from the landlord within five years, the landlord will face an unlimited fine.
Who do I contact to make sure that the fees I am charging are allowed?
If you are uncertain on whether to charge a fee or not, Citizens Advice can inform you on whether you are making the right decision. Additionally, you can get legal advice to obtain more information on the prohibitions.
What about the existing agreements?
If you entered into a tenancy agreement before the implementation of the Tenant Fees Act, then you can ask a tenant to pay for the fees you agreed upon until 31st of May, 2020. After that date, only the permitted payments above will be valid.
If you mistakenly ask a tenant to pay a fee after that date you are obliged to return the payment to the tenant within 28 days. Otherwise, that fee will be considered a prohibited payment for which you can face a £5,000 fine.
Can a property management company help?
Most definitely!
If your property is managed by a property management company, then these changes and challenges should not come as a surprise. Good property management companies aim to adapt and act quickly to new laws to help avoid legal action against landlords.
Through their services, you should have a reduced risk of getting fined, which is a real risk given that not all landlords may be aware of when laws change and how this affects them. A company with property management experience will be able to address any changes that the government initiates much easier than an inexperienced landlord will. Because of their expertise, you will save time on research and have the support you need on your property and tenancy.