By Martin Williamson, Head of Residential Property at Latimer Hinks Solicitors From 1 June 2019, landlords and people renting properties will need to be aware of the newly introduced Tenant Fees Act. The Act applies to properties in England only, and regulates what payments a landlord or letting agent can request “in connection with a tenancy of housing.”
The purpose of the Act is to ensure fairness across the board for landlords and tenants, ensuring both affordability and financial security. It will apply to tenancies and renewals granted after 1st June 2019. Renters whose tenancy pre-dates this will still be subject to the old regime until 31st May 2020.
The general and overriding principle of the bill is that all ‘fees’ that are not outlined in the Act are banned in England and cannot be charged by a landlord or letting agent. The Act specifies what charges are permitted, including rent, deposits, default payments, fees for changing an agreement, fees for ending tenancy, and charges for utilities, however these can be subject to restrictions.
Examples of restrictions include default charges being limited to replacement keys and late rent payments only, holding deposits capped at one week’s rent, tenancy changes capped at £50, and security deposit capped at five weeks’ rent.
Landlords and letting agents can now no longer charge fees for services including inventories, credit checks, references, renewal fees, phone calls, postage, or any other activity that takes up their time, such as call outs to check appliances. Such letting fees have already been banned in Scotland, and the ban may come into force in Wales in the near future.
This is good news for renters, as recent figures provided by Citizens Advice suggests that the average amount of such letting fees is £400. This, in turn, will reduce the upfront fees required when renting a property, making it easier for those on a lower income, to secure a property.
Landlords and letting agents will need to make sure they’re up to date with the changes, as once they come into force, there will only be a short window to ensure the tenancies are fit for purpose. The Act will initially apply only to renewed and new tenancies with a view to applying the rules to pre-existing tenancies from June 2020.
Landlords who work with letting agents will need to be aware of how the changes to the law may impact them, as the agents will have to make a decision as to whether to absorb the costs themselves or recover the charges from the landlord rather than the tenant. If you are concerned about how the changes may affect you as a landlord, it is advisable to sit down with your letting agent to discuss.
Ben Quaintrell, Managing Director of My Property Box, said: “The new legislation will offer flexibility to tenants with more money in their pockets when moving into a new property as a result of no-upfront fees.
“Unfortunately, this legislation comes at a time when the industry is already being squeezed by the government with excessive and costly levels of compliance and legislation that will impact on letting agents’ income. We have seen similar action in Scotland, which banned the charging of tenant fees in 2012, and this has had a serious knock-on effect, including increases in rent to recoup lost revenues from these fees.
“While it may have a negative impact across our industry, the introduction of the Tenant Fees Act provides opportunities for letting agents to adapt by tightening their processes as well as explore other types of revenue streams to grow their business to offset the financial implications brought about by the Act.
“We had been planning well in advance of the legislation coming into force and have embraced new technologies and the digital era, which stand us in good stead for this transition that is equally driving forward our growth.”
Please note: This article is intended as guidance only. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.