Tenant Fees Act 2019 become law on, 1 June 2019 in England.
Many of you will know what this means but i wanted to highlight the main points of the legislation for you. This is probably the biggest piece of legislative change in the industry since the Housing Act in 2004 and is going to have a marked effect on the private rented sector.
In summary, the Act is a total ban on fees and charges to tenants in the private rented sector to start a tenancy, renew a tenancy, during a tenancy or end a tenancy. The government state their aim is to reduce the costs that tenants can face at the outset, and throughout, a tenancy and balance the landlord and tenant relationship to make it fairer for tenants to rent in this country.
The law will apply to any tenancies agreed and signed after 1 June 2019.
Below we list a summary of what the law states are permitted payments and then give some example prohibited payments.
Permitted payments summary – allowed under the Act
Rent – either inclusive or exclusive of utilities and services but these must be included within the rent payment or the tenancy agreement and agreed before the tenancy commences.
A holding deposit of no more than 1 weeks rent. Once this is paid, a landlord must take a property off the market and reference the tenants and get the agreement signed with 14 days. On the 15th day the tenancy agreement must either be signed and the holding deposit put towards the 1st month's rent or deposit. If a tenancy is not signed the holding deposit must be returned to the tenants. (Note: This period can be extended if both parties agree in writing – for student tenancies this may be necessary). If the tenants fail referencing you cannot keep the holding deposit. However if they give false or misleading information, or they decide to cancel their application, you can.
A deposit of no more than 5 weeks rent for tenancies where the annual rent is up to £50,000, which will be most tenancies. Currently at Hive Estates we take the equivalent of 1 month’s rent (which is 4.33 weeks) and will continue to do so. (Note: A deposit is different from a holding deposit. A deposit is a tenancy deposit otherwise known as a “bond” which is a payment the tenant makes that the landlord or his agent protects for security against their obligations under the tenancy).
A change to a tenancy agreement, capped at £50.
A fee to be released from a tenancy, by way of mutual surrender, not exceeding the landlord’s costs or rent that is outstanding. (Note: An example of this, would be the letting fee that you would pay us to re-let the property).
A default fee where rent is more than 14 days late, calculated by working out the interest overdue on the rent at 3% above the Bank of England interest rate.
The cost to replace a lost or stolen key or fob, but only the cost of the key or fob and no more. Evidence of the cost of the key or fob must be provided.
Damages and breaches of contract if you have suffered a loss or can demonstrate that you have had to pay something out when a tenant is responsible are allowed. You must have written evidence and all costs must be reasonable. You may be able to charge £15 an hour if you can prove that is the hourly rate of you or somebody within an agency acting for you to put right a breach. You can also only claim from the tenant the cost it will be to make good the breach of tenancy and no more.
Example prohibited payments – banned under the Act
Application, referencing, administration or holding fees. (Note: Holding deposits are different from holding fees – a deposit is a payment towards something; a fee is a non-refundable charge).
Renewal, extension or paperwork fees.
Deposit protection or administration fees.
Check in, check out or inventory fees.
Fixed penalty fees for late payment of rent, or breach of contract such as smoking or cleaning.
Late rent fees or interest that exceeds the interest rate permitted and charged before the 14th day of the rent being overdue.
Missed contractor appointment fees.
Lost key fees and emergency call out fees.
What happens next?
It’s difficult to predict exactly what the fee ban will do to the market but we do expect in the long term rents will rise as a result of the ban as fees increase for landlords. Furthermore, landlords may look to sell their buy to let properties which could create more competition and therefore further drive rents up. It could be seen as an opportunity for some landlords who could monopolise their position if they retain their portfolio and offer high quality property in an area where other landlords have sold.
For tenants, it will certainly make it easier for them in the short term to rent a property as their initial upfront costs will be lower, however with the strict 14 day deadline for the return of the holding deposit it remains to be seen if tenants will be able to complete their applications and get through referencing in time. Of course this can be extended in writing, but this is more paperwork and administration for something that used to be quite a simple process.
If you’d like to arrange an appointment to discuss the fee ban with me, or to talk about anything else property related, then please don’t hesitate to let me know.
I hope you've found the above useful and if you have any questions please don't hesitate to contact me.