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On the 1st of June 2019, the Tenant Fees Act came into force.

By Fraser Gregory  //  Thu 1st August 2019
The Act targets rogue landlords, but many law-abiding landlords are concerned about the implications to their business.
Holding and security deposit changes

London Landlords – Complying With Tenant Fees Act?

Being a landlord is tough. There is a lot of demand for rental accommodation in London, but there is a lot of challenges to overcome. For many London landlords, the biggest issue they face is dealing with regulations. There have been many regulatory upgrades and changes in the letting industry, and the changes keep coming.

On the 1st of June 2019, the Tenant Fees Act came into force. If a landlord takes an illegal payment from their tenant, they must pay this back in 28 days. If the landlord fails to pay the money back in this time, they breach the Act,

The Tenant fees Act covers fees such as:
  • Credit checks on prospective tenants

  • Referencing tenants

  • Carrying out an inventory check at the start of the rental process

  • Checking tenants in and out

  • Cleaning the property

  • Gardening

  • Administrative charges

The Act targets rogue landlords, but many law-abiding landlords are concerned about the implications to their business. The Act aims to support tenants, making the rental process more affordable. The Act has a considerable focus on the initial period in the rental process. The changes are great news for tenants, but many landlords have genuine concerns about how the Act impacts their business.

Many of these charges relate to essential tasks in the rental process. Landlords should still vet tenants and obtain references. Sadly, the cost of this work must now be fully absorbed by the landlord, and this is why so many landlords in London, and across the country, have concerns about the process.

What fees can landlords charge?

There are still fees landlords can charge. Landlords can charge the monthly rental fee, a holding deposit, a security deposit, default payments, and where the tenant requests a change to the rental agreement.

For third-party fees or issues where the landlord has incurred a charge, the landlord can only recoup the money they have spent. If the tenant loses their keys, and the landlord gets a new set cut, the landlord can only charge the cost of the keys. The landlord is not permitted to charge an additional fee on top of the cost of the key cutting service. Landlords are advised to retain receipts, so they can verify how much the service has cost them.

Holding and security deposit changes

The new cap on holding deposits stands at one weeks’ 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 months’ rent or the security deposit.

For the security deposit, the new cap is five weeks’ rent when the annual rent is less than £50,000; and when the yearly rental fee is £50,000 or more, the new cap is six weeks’ rent.

If you are a landlord looking for guidance to let in London, contact Plaza Estates, and we’ll be happy to help you.

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