Sweeping new legislation means landlords and agents face stringent restrictions on what they can charge tenants. Hayley Wharton explains the implications.
The tenant fees ban will stop landlords and agents charging tenants for any payments not explicitly allowed by the new law.
The Tenant Fees Act 2019 is a government measure to reduce ‘hidden costs’ that private tenants have previously had to pay.
A breach of the act will usually be a civil offence, with a financial penalty of up to £5,000. Private landlords are advised to review their current tenancy agreements to ensure that they comply with the new regime.
What the ban means for landlords
The ban comes into effect on June 1, 2019 and means landlords and agents will no longer be able to charge tenants a number of fees levied under the previous system.
Fees may still be charged under pre-existing tenancy agreements, but only until May 31, 2020 when the tenant fees ban will apply to all tenancies, or up to the date when the agreement is renewed. Landlords or agents who take an illegal fee payment after this period must repay it within 28 days.
The new rules will outlaw a number of charges that used to be commonplace for an assured shorthold tenancy (AST) or licence agreement.
For example, landlords and agents will no longer be able to charge tenants for a guarantor form, credit checks, inventories, cleaning services, referencing, administrative charges, and gardening services.
However, company lets and non-assured tenancies will be not be affected.
Which charges are exempted from the new rules?
Only four charges are exempted from the ban – holding deposits, rent, deposits, and charges for defaulting on the contract. Even so, each of these charges is subject to specific requirements.
Also, landlords – but not agents – may require tenants to use a particular utility or communications provider, as well as charging for a switch of tenant, or for allowing tenants to vacate the property early.
Deposits, damage and late payments
Deposits will be limited to the equivalent of five weeks’ rent if the annual rent is under £50,000. For annual rents of £50,000 or more, the deposit is limited to six weeks’ rent.
In situations where the tenant has breached their tenancy agreement by causing damage, landlords can request compensation through deductions from the deposit, or take legal action.
In addition, landlords can charge for two types of default payments – loss of keys and late payment of rent, although both are governed by restrictions.
If keys are lost landlords are allowed to charge a reasonable cost, evidenced in writing with receipts.
If tenants are late paying their rent, landlords and agents can charge interest of no more than three per cent above the Bank of England base rate from the date the payment is missed.
Immediate action landlords should take
Landlords and agents should think carefully about their current commercial operations. The ban on fees will hit some business types heavily, which is expected to result in higher rents or greater costs to landlords.
Landlords and agents are also advised to review their current tenancy agreements and holding deposit documents.
For further advice on landlord and tenant issues, call Hayley Wharton on 0161 761 4611 or email her at email@example.com