The Tenant Fee Ban - How Does It Affect You?
The Tenant fee ban became law on 1st June and will impact all assured short hold tenancies or license to occupy contracts signed on or after 1st June 2019.
Tenant fees are already banned in Scotland and a ban is due for Wales in September 2019.
The Act will apply to both Landlord and their agents, banning all fees or prohibited payments as a condition of arranging the grant renewal or continuance of a Tenancy in England.
Payments made by tenants will be placed into two categories Permitted and Prohibited payments.
What are the permitted payments?
Under Section 2 of the Tenant Fees Act 2019 all charges are prohibited unless specifically listed as permitted payments;
- A refundable Holding deposit (up to 1 weeks’ rent) Only one holding deposit can be held per property at any given time and you must stop marketing when a holding deposit has been taken.
When you have taken a holding deposit there is a deadline for agreement of 15 calendar day which is the maximum period the holding deposit can be held for.
If the tenancy goes ahead the holding deposit can be used towards Rent or the security deposit. If the landlord or agent withdraws from the tenancy the holding deposit must be refunded.
If the agreement is not completed within the Deadline for agreement the holding deposit must be refunded in full within 7 days.
You can only retain the holding deposit if they provide false or misleading information which reasonable affects your decision to let to them.
- Security (tenancy) deposit (capped at up to 5 weeks’ rent, or 6 weeks’ if annual rent is over £50k)
- Default fees – these are very specific
Lost keys and other security devices, a reasonable cost which would have to be evidenced to the individual responsible.
Rent arrears is set at 3% over base rate and cannot be charged until the rent is 14 days in arrears, it can then be back dated.
- Changes to the tenancy terms – such as change of sharer or rent payment date which are stipulated as only being charged at a reasonable costs which is expected to be £50
- Surrender of the tenancy, this must not exceed the outstanding rent. The landlords reasonable costs for reletting can be charged but will need to be evidenced in writing.
What is prohibited?
In basic terms, anything which is not listed as a permitted payment is prohibited, these include:
- Applications fees
- Check in and out
- Admin fees for letters
- Contractor call out charges/failed appointments
The Act will make tenancies which feature prohibited payments null and void.
There is a transition period of 12 months to 31st May 2020. If a tenancy is signed before 1st June 2019 which contains fee, these can still be charged up to the end of the transition period.
If an existing tenancy drops onto a statutory periodic or contractual periodic, this is classed as an extension of the existing tenancy agreement and you’ll be able to charge for any fees written into the existing contract
Penalties and government
Trading standards have been empowered to enforce the Act. A tenant can also apply to the First-Tier Tribunal to recover the payments prohibited under this Act.
A maximum penalty of £5,000 by the landlord/agent for their first breach or £30,000 if they have already had a financial penalty within the previous 5 years
Another penalty is banning of the landlord or letting agent.
Under the amended Housing Act of 2016, a local housing authority can apply to a court to ban the landlord or letting agent who has breached the provisions of the tenancy fees bills for a period of up to a year. This will stop the offending landlord from renting out their property and the letting agent from acting as one till the end of the ban period.
Tenant Fee Ban FAQ for Landlords
1) Can I take a higher rent in month one or two to cover any costs?
It has been written into the legislation that the rent cannot be higher for the first months of the tenancy than in later months. It is also not permitted to charge that higher than normal rent in a later month of the tenancy.
2) If a tenant has pets can I take a Pet Premium on the deposit?
The Security deposit is capped at 5 weeks rent, 6 weeks if the annual rent exceeds £50,000. Any payment over this amount would be a breach.
3) Can I write a clause in to say that the tenants must have the property professionally cleaned at the end of the tenancy?
This would be seen as a non optional payment and there fore deemed as a fee and a breach of the legislation.
4) If arrange contractors to visit and the tenant does not allow access, or the tenant fails to attend a contractor appointment, can I pass the call out charge onto the tenant?
This would be deemed as a fee and the cost cannot be passed onto the tenant.
5) My tenants signed their agreement pre 31st May 2019 to start after 1st June. Am I able to charge any default fees in the tenancy.
There is a transition period to 31st May 2020, during this period fees contained in the tenancy agreement can be charged however after 31st May 2020, even charges in a tenancy agreement will be banned.
6) If a tenant damages the property, can this still be deducted from the deposit?
The Tenant Fee Ban does not prevent you getting your costs back for any damages.
7) I signed my tenants up in January and charged fees however the tenancy does not start until July, will I have to repay any fees?
As the fees were taken and the tenancy signed before 1st June 2019 you would not be expected to repay any fees.
8) I have a property where I have taken a deposit which exceeds the 5 week cap, will I have to repay this?
The government guidance states that deposits do not need to be returned for fixed term agreements entered into before the ban came into place. However, if the tenant renews you will need to return the amount over the 5 weeks. In the case of any statutory periodic tenancy created on or after 1st June 2020 you will be required to return any deposit amount above the cap within 28 days.