Tenant fees ban: how will the Act affect new and existing renters?
Laura Noble, Head of the Buy to Let team in Coodes Solicitors’ Residential Property sector, outlines the tenant fees ban and what it means for people renting a property in England.
The long-awaited Tenant Fees Bill has received royal assent and will become statute on the 1st June 2019. Being referred to as the tenant fees ban, the new legislation means landlords and letting agents will no longer be able to charge for extra services and administrative fees to set up or renew tenancies.
The Act is designed to protect the five million renters in England from unfair fees. In the majority of tenancies previously, all associated fees with renting a property, such as credit checks and referencing, were passed to tenants. This will now be prohibited.
The tenant fees ban applies to both letting agents and private landlords on all tenancies signed after 1st June.
What will landlords be unable to charge for?
From the start of June, it will not be possible for landlords to charge tenants for fees including:
- Credit checks
- Preparation of inventories
- Charges applied to guarantor
- Cleaning services
- Administration charges
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However, charges may still be levied in respect of:
- Holding deposits
- Rent deposits
- Loss of keys
- Late rental payment charges
- Fees charged for changes made to a tenancy agreement at the tenant’s request.
These exemptions are subject to additional restrictions before being chargeable so landlords should seek advice before levying the charges.
Landlords retain the ability to charge tenants for vacating a property prior to the end of the contractual term, subject to restrictions on costs that can legitimately be charged. In real terms, this means that landlords will be limited to taking payments for rents and deposits from tenants and little else.
Could the tenant fees ban affect rent prices?
It has been speculated that rents will be set at a higher rate in order for landlords to re-coup their costs from tenants in a different manner. However, rents are susceptible to market ‘demand and need’ and the government says it believes that this is unlikely to occur as tenants are market savvy and will shop around before committing to a rental agreement.
To counteract this, the Bill prohibits increased rents being payable during the first few months of a tenancy in lieu of the previously chargeable fees.
Third party payments associated with tenancies are also affected. Landlords and letting agents may insert clauses into agreements requiring tenants to pay council tax and television licence fees as well as broadband and costs for a specific utility provider. These are permitted charges and can legitimately be added to tenancy agreements.
What happens if a landlord doesn’t comply with these changes?
Breaching the legislation can result in financial penalties for landlords. Tenants can claim any wrongly paid fees through the courts as well as Trading Standards, who are equipped to assist tenants in relation to any such breaches.
Trading Standards will be able to impose fines of up to £5,000 for a first offence committed by either a private landlord or letting agent. Any subsequent offences are deemed criminal offences, and the landlord or agent can receive financial penalties of up to £30,000 and become the subject of a banning order.
If fees are charged in breach of the legislation, landlords are unable to serve a Section 21 Notice under the Housing Act 1988, which begins the process to take possession of the property, whilst the fees have been requested. This can have consequences if the property is being sold or the landlord needs to take occupation of the property.
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Does the new legislation affect existing leases?
The Act covers new tenancies entered into or renewed after 1st June that are assured shorthold tenancies, student accommodation or licences that are up for renewal or about to be granted.
It is anticipated, but not yet confirmed, that in 2020 the legislation will apply to existing tenancies introducing clauses that make charge fees ineffective.
With the option of getting on the housing ladder becoming a dream for so many, these changes are welcome news to tenants. Many are renting for longer periods but find themselves trapped in properties that may be too small or unsatisfactory and have often found the fees associated with renting a barrier to moving.