Who does the 'tenant fee ban' apply to?
This will depend on the type of Tenancy Agreement. The Act is coming in to force in England and applies to all Assured Shorthold Tenancies (which is the most common type of tenancy), licenses (which include lodgers) and student lettings. Contractual lettings, such as a company let, the rules set out in the Tenant Fees Act may not apply to these agreement.
When does the 'tenant fee ban' come into force?
The Tenant Fees Act takes effect for all designated new tenancies and renewals from June 1st 2019. If tenancy was granted before this date, fees can still be charged in accordance with the Tenancy Agreement until May 31st 2020.
If a landlord or letting agent requires a payment to be made under a term within a tenancy which was entered into before the ban came into force, such as check-out or renewal fees, it can continue to be charged until 31 May 2020. After this date, any requirement to pay a fee that is not permitted by law will be ineffective.
What fees are banned by the Tenant Fees Act?
All upfront fees, except those which are exempt by law (we cover those below), can no longer be charged to renters by landlords or letting agents, this includes payments to third parties.
What fees can I still be charged for?
Alongside rent, security deposits and holding deposits, there are three fees which are exempt from the Tenant Fees Act, which tenants can still be charged. If landlords or agents want to be able to charge these default fees, they must be included in the Tenancy Agreement.
1. Losing keys
If a tenant lose keys, the landlord can still charge to replace them. However, the cost must be for a 'reasonable amount' and whoever is charging the fee must be able to provide a receipt for the costs incurred.
2. Late rent payment fees
If rent is paid late by over two weeks, the landlord or their letting agent can charge a late rent fee. This fee can be charged at 3% plus the Bank of England base interest rate.
There is a change however, which means that the late fees can only be charged and landlords will no longer be able to charge you for the costs incurred by chasing late rent such as letters and the administration costs.
3. Changes made to the Tenancy Agreement at your request
If a tenant requests a change to the terms of the Tenancy Agreement, then they will be liable for a fee of up to £50 or reasonable costs incurred if it’s higher. Landlord or letting agent would need to demonstrate that their costs in making changes to the Tenancy Agreement cost more than £50, then they could, in theory, charge more. Tenants cannot be charged for renewing a tenancy or making it longer.
What happens if a tenant is charged a fee that is banned by the Tenant Fees Act?
If fee is charged which isn't legal, tenants should first bring their concerns to the attention of landlord or the letting agent. Professional letting agents managing properties will be aware of the legislation, if there’s been a legitimate mistake they could rescind the charge, or be able to show why they’re entitled to charge a fee in this instance, for example if it’s a fee for losing the keys to the property.
One of the many benefits of having a letting agent managing the property is a clear route of communication. Professional letting agents will also be members of a Government approved redress scheme, if a letting agent manages the property there are two redress schemes The Property Ombudsman (TPO) and The Property Redress Scheme. Tenants can only complain to a redress scheme if they are unhappy with the final response from the letting agent or if 8 weeks have passed since the initial complaint and the issue is unresolved.
The key is communication, it’s important that tenants talk to their landlord or letting agent if they are unsure about the cost associated with the rented property. If communication with the landlord or letting agent doesn't clear things up, tenants could contact a charity such as Citizens Advice to ask for their guidance.
Are deposits changing as part of the Tenant Fees Act?
Yes, the introduction of the Tenant Fees Act will also include changes to the deposit system, with caps being introduced, changes to the way holding deposits are charged and repaid.
How are security deposits changing?
The deposits paid when a tenant moves into a property is now capped 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.
What if a deposit for a current property is above the deposit cap?
If existing deposits are above the amount set out in the new rules, landlord will need to reduce the deposit the next time the tenancy renews or after May 31st 2020 (whichever comes first).
What does this mean for deposits that are higher because of pets?
In the past, landlords who have allowed tenants to keep pets have often charged a higher security deposit in order to cover the additional risk of damage and cleaning that can come with animals.
The landlord can no longer charge a higher deposit to offset the fact you have pets in the property. This might understandably impact the landlords’ appetite to let a property with pets, but it’s always important to be honest with landlord or letting agent about pets, to avoid the risk of breaching Tenancy Agreements.
Can a holding deposit be charged to secure a property?
Under the Tenant Fees Act, holding deposits are capped at one week's rent and landlords or agents will only be able to hold this money for 15 days (unless an alternative date is agreed by both parties in writing).
Once the deadline expires, the deposit must be repaid within seven days. Tenants can choose to have the holding deposit repaid back to them, put towards the first rent payment or put towards thesecurity deposit. The scenarios in which a landlord or letting agent can keep the holding deposit are if:
1. A tenant withdraws.
2. A tenant fails a Right-to-Rent check.
3. A tenant fails to take 'reasonable steps' to enter into the tenancy or provide misleading information (such as a false salary) which 'materially affects' the suitability to rent the property.
Will rents increase because of the Tenant Fees Act?
Whilst the Government's aim is to reduce the costs that tenants can face, landlords and letting agents still need to cover the costs that are incurred when setting up a tenancy. With landlords already feeling the impact of taxation changes, the expectation is that costs may be passed back to tenants through higher rents, particularly for new tenancies. Landlords’ ability to increase rents will largely be determined by local market dynamics of supply and demand for property.
Can a landlord or letting agent charge a higher rent for part of the tenancy term?
No, landlords and agents are not allowed to do this under the rules set out in the Tenant Fees Act, they cannot charge an increased rent at the beginning of a tenancy and then reduce it thereafter. For example, charging £900 for the first month’s rent and then reducing the figure to rent of £700 from month two onwards.
Why has the Tenant Fees Act been introduced?
The view from some tenants, certain consumer groups and charities (such as Shelter and Citizens Advice), was that fees charged by some landlords and letting agents were excessive. The Ministry of Housing, Communities and Local Government says the Tenant Fees Act "represents a move to rebalance the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector". It says that "the system will also be clearer and less complicated for renters, allowing them to see how much a property is going to cost them with no hidden charges".
Does the Tenant Fees Act cover the whole of the UK?
The Tenant Fees Act is only effective in England. Letting agent fees have been banned in Scotland since 2012. In Wales, a similar initiative, ‘The Renting Homes (Fees etc.) (Wales) Bill ’, is being introduced on September 1st 2019 and includes a similar range of measures related to banning upfront fees and capping deposits.
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