The Tenant Fees Act 2019
As of 1st June 2019, most letting fees in England have been banned - but what exactly does this include?
Posted: 01/07/2019
The Tenant Fees Act has seen a ban placed over most letting fees, and caps to tenancy deposits paid by tenants in the private rented sector in England. The ban on tenant fees applies to new or renewed tenancy agreements signed on or after 1st June 2019.
The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy. Tenants will be able to see, at a glance, what a given property will cost them in the advertised rent with no hidden costs.
So, exactly what has been banned?
Application fees
Landlords and letting agents are no longer permitted to charge any form of referencing or application charges, including Right to Rent checks and tenancies where a guarantor is required. Previously, it was normal protocol to pay a set fee that would cover your referencing; this was usually none refundable, and you would forfeit the cost completely if you failed your application. Instead, all tenants will be asked to pay a refundable holding deposit (more information on this can be found below).
Administration fees
This includes fees for setting up your tenancy, checking in or out of the property or landlord references from your current agent/landlord to your new one.
Lease renewal/contract negotiation fees
You will no longer be charged to renew your lease, or for any costs involved in negotiating your agreement (i.e. to amend this to allow pets, to agree to a lower rental price). Your agent must provide a new tenancy to you completely free of charge, on the proviso that your landlord is happy for this to be renewed.
Out of hours charges
You can no longer be charged for out of hours appointments, including evening or weekend move-in fees. However, you may find that your landlord/agent instead insists that appointments are conducted during their working hours.
Cleaning costs
It has actually been illegal since 1977 under the Unfair Contract Terms Act for your landlord/agent to charge you for an 'end of tenancy' professional clean, without a valid reason or proof that this is required.
All charges, absolutely everything, are banned from the 1st of June for new tenancies, unless they have specifically been made permitted payments.
What can I expect to pay throughout my tenancy?
Refundable holding deposit
Instead of an application fee, you will now be charged a holding deposit. This is a refundable payment (to reserve a property) capped at no more than 1 week’s rent. This will secure the property for the applicant for 15 days at which point the tenancy agreement must be signed (even if this starts at a later date); any extensions required by either part must be put to the other in writing as soon as possible. Upon moving into the property, the holding deposit will be refunded against the applicant's first rent.
The holding deposit is the equivalent to 1 week's rent. To calculate the amount of the holding deposit, multiply the monthly rent by 12 (months) and divide the answer by 52 (weeks). Please don't hesitate to call us on 0845 838 2890 for more information regarding this.
There are four grounds on which a holding deposit can be withheld by the agency:
- If the tenant voluntarily pulls out of the tenancy before the contracts are signed.
- If the tenant fails a Right to Rent check.
- If the tenant provides false or misleading information.
- If the tenant doesn't enter the agreement by the deadline.
More information on this can be found at www.thelettingco.com/our-fees.
Rent
As standard, all tenants must pay their rent. The monthly rental figure must be clearly set out in the property advertisement and in the tenancy agreement (or verbally agreed with your landlord) - landlords and agents are within their right to increase the rental amount in line with the relevant clauses of your tenancy agreement.
Rent arrears
In the event that you do not pay your rent, or your rent is paid late, your landlord or agent are within their rights to charge interest on the late/overdue amount. The permitted fee will be set out in your tenancy agreement and is calculated at 3% above the Bank of England's base rate from the date the rent falls due, until the date it is paid. This can only be charged once the rent falls 14 days late but it can be backdated to when it became due.
Deposit/bond
For most properties, you will be asked to pay a deposit (also sometimes referred to as a bond). While in most cases this is the equivalent of one month's rent, the deposit you pay must be capped at 5 - 6 weeks' rent, depending on the annual aggregate rent of the property. It is standard industry practice for your deposit to be paid on or before the day you move in, alongside your first rent.
Utility bills
In most rental properties, you will be required to pay the utility bills separate to your rent; this includes council tax, gas/electric/water bills as well as internet and television costs. However, in some situations this can be included in the monthly rent (most typically for student lets). At The Letting Company, we completely understand that some companies are much cheaper than others, which is why we are happy for our tenants to sign up with whichever utility company they feel is right for them.
Variations to the contract and early termination
While landlords and agents cannot charge for tenancy renewals, they are able to apply costs for variations to your tenancy agreement (i.e. changes to the names if one of the tenants move out, or an additional person moves in); this is capped at £50 including VAT.
You may also be charged to end your agreement before the end of a fixed term, if this has been requested by you. The fee cannot be more than the total rent outstanding on the property and should be reasonable. The Government has suggested agents charge the cost of re-letting the property, plus the amount of rent owing up to a new tenant moving into the home.
Negligence
Your landlord is able to charge you for damages caused to the property during your tenancy. This comes under the damages provisions of the act, which says your landlord or agent can "charge the tenant for returning the property to the condition it would have been in, had the tenant not breached the tenancy agreement". Examples of this would be toilets blocked by nappies or baby wipes, dirty carpets or holes in walls.
How is the ban enforced?
There is a huge incentive on local authorities to enforce the legislation. The initial fine to a landlord or agency is £5,000 per fee charged to tenants at the enforcement officer's first visit - this is increased to £30,000 per fee charged to tenants or even a criminal prosecution consisting of an unlimited fine and a ban if the landlord/agency is found to continue charging the fees.
Sources:
https://www.gov.uk/government/collections/tenant-fees-act
https://blog.goodlord.co/questions-and-answers-on-the-tenant-fee-ban-with-arla-ceo-david-cox?utm_campaign=webinar-may19&utm_source=pie&utm_medium=email