From June 1st tenant letting fees will be banned in England, across the private rented sector. This is known as the Tenant Fees Act 2019.
This means admin fees previously charged to set up or renew a tenancy for homes will no longer apply from this date onwards. This includes fees for credit checks, immigration, administration, inventory and reference checks. The Bill mostly deals with fees charged at the start of a tenancy.
According to the government, the move will help to ‘improve transparency, affordability and competition in the private rental market’ and will mean tenants will be able to see what a property will cost from the outset.
“The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy, and is part of a wider package of measures aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector.” gov.uk
It is an uncertain property landscape we find ourselves in, so it is no surprise that this news has been received with open arms by tenants, particularly those on low incomes.
If you are a landlord, it is likely you have questions in relation to the fee ban and want to prepare. For example: Is this going to dramatically incur costs you may not have had to previously pay? How do you comply to the new rules? Here are answers to 3 of the most frequently asked questions to help you navigate through the change.
Does the fee ban apply to older tenancies?
Not immediately. The ban will initially apply only to renewals of tenancies and new tenancies. This excludes statutory and contractual tenancies that appear after the Act comes into force.
After one year the ban will attach to pre-existing tenancies, therefore, if a landlord or agent takes a prohibited payment after that date they will have 28 days to return it or be considered in breach of this legislation.
What fees are exempt from the tenant fee ban?
Rent, a refundable holding deposit capped at one weeks rent and charges for defaulting on the contract are exempted from the tenant fee ban. There will also be a ban on setting rent at a higher level for the first part of the tenancy and then decreasing it down afterwards to cover the ban.
Additionally, other fees exempt from the ban include security deposits and early termination charges and council tax should this be included in the agreement. However, landlords can still charge fees where costs have been incurred because of the tenant’s actions. These kinds of charges must now have supporting evidence such as invoices.
It is a legal requirement for the smoke alarms in a rental property to be tested on the first day of the tenancy. It’s also a requirement that a legionella risk assessment is carried out. This agency has provided these free of charge but after June 1st, we will make a small fee for carrying out these pre-tenancy checks.
Are there any penalties for taking fees?
It is advised any fees are approached with caution, as incorrect fees may incur a penalty. 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.
Trading Standards will enforce the legislation and will issue a fine of up to £5,000 for a first offence. If you charge another illegal fee within 5 years of the initial fine, landlords can face prosecution or fines of up to £30,000.
Ellis Hay are committed to helping landlords comply with the tenant fee act by being able to provide comprehensive advice on this and future changes in legislation.
We are here to help you find the most suitable tenants, get peace of mind when it comes to payments and where agreed, will conduct regular property inspections to make sure your property is well cared for.
For more information contact our friendly team today.