The Tenant Fee Ban Act, first introduced in June 2019, now affects all residential landlords in England. This is a new piece of legislation that landlords can’t afford to ignore, those that do risk a large fine.
Being a landlord is tough. There is a lot of demand for rental accommodation in London, but there are also challenges to overcome. For many Central London landlords, the biggest issue they face is dealing with changing regulations.
Whether you are a tenant, landlord or agent, here is what you need to know about the Tenant Fee Ban Act…
What is the Tenant Fee Ban?
The Tenant Fees Act 2019 bans all letting/agency fees, except a small number of ‘permitted fees’, and caps tenancy deposits paid by tenants in England. In some areas, these tenant fee bills could have added around £300 to the cost of renting. The ban also extends to cover fees charged to rental guarantors.
Why has the Tenant Fee Ban been introduced?
The ban should make it cheaper for tenants to rent property by removing the unfair fees charged each time they rent a new property. The fees were especially harsh on those forced to look for a new rental property because their landlord gave them notice to leave.
Which type of tenancies does the Tenant Fee Ban apply to?
The Tenant Fees Act applies to most private tenancy agreements in England including:
- Assured shorthold tenancies - the most common type of private rented tenancy
- Student accommodation tenancies
- Licences to occupy housing - this applies to lodgers or people who rent a room in a shared house (except for certain Homeshare arrangements)
In Scotland, the agency fees ban has been in place since September 2019 they are also banned in Wales. In Northern Ireland, agents aren’t allowed to charge a fee that benefits the landlord, for example, a tenancy renewal fee. However, the law doesn’t cover fees that tenants may pay during the course of the tenancy, such as council tax and utilities.
What fees can I still be charged?
Landlords can still charge for rent, security deposits and holding deposits, however, there are restrictions even on these fees. The Tenant Fee Ban Act prevents landlords charging a higher rent for part of the tenancy term, for instance, adding a surcharge to the first month’s rent. Holding deposits are capped at one week’s rent and security deposits cannot exceed five weeks’ rent. There is an exception for properties where the total annual rent exceeds £50,000, in this case, landlords are permitted to charge a security deposit equivalent to six weeks' rent.
Aside from the rent, security deposit and holding deposit, landlords can only charge fees for the following three things:
- Replacement of lost keys – The fee must be a ‘reasonable’ amount and your landlord must be able to provide a receipt for the costs incurred.
- Late rent payments – If your rent is late by over two weeks, landlords and letting agents can charge interest at 3% plus the Bank of England base rate. Landlords are no longer permitted to charge for the administration costs of chasing late rent payments.
- Changes made to the tenancy agreement at the tenant’s request – If you ask to change the tenancy agreement, for instance, to add a permitted pet, your landlord can charge up to £50 to cover administration costs. To charge more than this they must be able to provide receipts to justify the costs incurred. Landlords cannot charge for renewing or extending a tenancy.
In all cases, if landlords want to be able to charge these fees, they must be included in the tenancy agreement.
What fees are banned by the Tenant Fees Act?
Any fees, except those outlined above, are now unlawful. The types of fees which landlords cannot now lawfully charge include:
- Viewing fees
- All fees associated with setting up a tenancy, including credit checks, referencing, drawing up the tenancy agreement and preparing the inventory
- Check-out fees
- Third-party fees
- Gardening services
What does the Tenant Fee Ban mean for landlords?
The ban will reduce the income of landlords and letting agents. Landlords that use letting agents may find their fees increase as agents look to recover their losses. Landlords may in turn increase the rent they charge.
Landlords may also cut back on making improvements to their properties as their profits are reduced. Many landlords may also choose to self-manage their properties, which may result in more breaches of property rules as landlords struggle to keep abreast of the legislation.
What is the risk of non-compliance?
Landlords and lettings agents who ignore the ban face an initial fine of up to £5,000. Those committing another breach within five years may be fined an extra £30,000 and could also be taken to court.
What happens if I’m charged a fee that I think is banned by the Tenant Fees Act?
In the first instance, bring your concerns to the attention of your landlord or letting agent. They should be able to justify why they are entitled to charge you a fee.
If you still believe you have been charged a banned fee, you can report the matter to your local Trading Standards office through the Citizens Advice website which will investigate the matter.
All professional letting agents must be a member of a property redress scheme like The Property Redress Scheme or The Property Ombudsman. You can complain to these bodies who will investigate and can tell the agent to compensate you if necessary.
Are deposits changing as part of the Tenant Fees Act?
The Tenant Fees Act caps deposits at five weeks' rent, provided the annual rent is below £50,000. For properties with a yearly rental value of over £50,000, security deposits are capped at six weeks.
If your existing deposit is above this amount, your landlord must return the excess amount.
Landlords can no longer charge a higher deposit for tenants who keep pets in the property. This may mean fewer landlords are willing to rent their property to tenants with pets. However, ministers are discussing a pet protection bill which will give tenants the legal right to keep a pet in their home. It is currently awaiting parliamentary approval.
Can I be charged a holding deposit to secure a property?
The new cap on holding deposits stands at one week’s rent. When the prospective tenant pays the holding deposit, the landlord has 15 days to decide if the tenant should move into their rental home. If the landlord chooses against allowing the applicant to move into their rental property, they should return the money in seven days.
If the applicant made a false claim, withheld information or failed any check carried out by a landlord, the landlord doesn’t have to pay back the full amount. If the application is successful, the application should be paid back within seven days but is often used towards the first month’s rent or the security deposit.
If you are a landlord looking for guidance to let property in Knightsbridge, Marble Arch or across Central London, contact Plaza Estates, and we’ll be happy to help you.