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How does the Tenant Fees Act impact tenants?

Posted on 2019-05-17

The 1st of June 2019 marks the introduction of the Tenant Fees Act in England, which you may have seen referred to as the ‘tenant fee ban’.

The legislation is being implemented with tenants in mind and aims to protect you from unfair fees and make it more affordable for you to move between rental properties.

We answer some of the questions you might have on the Tenant Fees Act and how it might affect you.

 

Does the tenant fee ban apply to me?

This will depend on where you live and the type of Tenancy Agreement you have in place. 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.

If you’re under a contractual letting, such as a company let, the rules set out in the Tenant Fees Act may not apply to your 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 your tenancy was granted before this date, you can still be charged fees in accordance with your Tenancy Agreement until May 31st 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 managing agents, this includes payments to third parties.

As a tenant some of the costs you could have been liable for but can no longer be charged include, administration charges, referencing check or inventory fees.

 

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 fee ban and for which tenants can still be charged. If landlords or agents want to be able to charge you these default fees, they must be included in your Tenancy Agreement.

1.   Losing your keys

If you lose your keys, your landlord can still charge you 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 your rent is late by over two weeks, your landlord or their agent can charge you 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 you can only be charged the late rent fee and landlords will no longer be able to charge you for the costs incurred by chasing late rent such as letters and administration costs.

 3.   Changes made to the Tenancy Agreement at your request

If you request a change to the terms of your Tenancy Agreement, then you’re liable for a fee of up to £50 or reasonable costs incurred if it’s higher. Your landlord would need to demonstrate that their costs in making changes to the Tenancy Agreement cost more than £50, then they could, in theory, charge you more. You cannot be charged if you’re simply renewing your tenancy or making it longer.

 

What happens if I’m charged a fee that I think is banned by the Tenant Fees Act?

If you’re charged for a fee which you don't think is legal, you should first bring your concerns to the attention of landlord or the managing agent. Professional letting agents managing properties will be aware of the legislation, if there’s been a legitimate mistake they would rescind the charge, or be able to show you why they’re entitled to charge you a fee in this instance, for example if it’s a fee for losing the keys to the property

If communication with the landlord or letting agent doesn't clear things up, you could then take the issue to a charity such as Citizens Advice to ask for their guidance. If your issue is with a letting agency, you could contact the redress scheme of which they are a member in order to receive free and impartial redress.

Landlords and letting agents could be fined up to £5,000 for not adhering to the rules of the Tenant Fees Act. If they commit a second offence within five years, they could be fined up to £30,000 and receive a banning order.

 

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 deposit you pay when you move 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 my deposit for my current property is above the deposit cap?

If you’re existing deposit is above the amount set out in the new rules your landlord will need to reduce your deposit the next time your tenancy renews or after May 31st 2020 (whichever comes first).

This means that your landlord will be required to repay you the difference to comply with the legislation.

 

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 your landlord about pets, as you don’t want to risk breaching your Tenancy Agreement.   We've covered the subject in more detail on our blog post 'Will the Tenant Fees Ban stop lets with pets?"



Can I be charged a holding deposit to secure a property?

If you’ve found a new home you can agree to pay a holding deposit in order to reserve the property before signing a Tenancy Agreement.

Under the Tenant Fees Act, holding deposits are capped at one week's rent and landlords or agents will only be able to hold your 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. You can choose to have the holding deposit repaid back to you, put towards your first rent payment or put towards your security deposit.

The scenarios in which a landlord or letting agent can keep the holding deposit are if you withdraw, fail a Right-to-Rent check, fail to take 'reasonable steps' to enter into the tenancy or provide misleading information (such as a false salary) which 'materially affects' your suitability to rent the property.

 

Will my rent increase because of the Tenant Fees Act?

Whilst the aim of the Tenant Fees Act is to reduce the costs that tenants can face, landlords 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 will 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 me 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 you 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. This is to stop anyone trying to incorporate costs for things that they could previously charge for into your rental payments.

 

Why are letting agent fees being banned?

For many years, consumers have been complaining about fees charged by some letting agents that they felt 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 you to see how much a property is going to cost you with no hidden charges.

You can view the documents related to the Tenant Fees Act, which sets out the government’s approach to banning letting fees paid by tenants in the private rented sector on the Gov.uk site.

 

Does the tenant fee ban 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. You can read about it in more detail here.

The private rented sector is now home to over 5 million households in England, this is a significant legislative change for the market and only time will tell what the long term impact of the Tenant Fees Act is.


 

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