There have been several changes to renting a property over the last few years. The most recent to hit the sector is the tenant fee ban. Here we take a closer look at its impact on both landlords and tenants.
What is the Tenant Fee Ban?
The Tenant Fees Act came into effect on 1st June 2019 and it basically prevents landlords and letting agents from charging the majority of additional letting fees which tenants had previously been charged.
These include charging tenants to carry out reference checks, charging for viewings and even for renewing a tenancy agreement. In the past, these kinds of fees have had the potential to add around £300 onto the cost of renting for tenants in many areas.
The Tenant Fees Act puts a cap on what size of deposit landlords and letting agents can ask for. Penalties have also been introduced for those who flout the new rules with a potential fine of up to £5,000 for first-time offenders.
What the Tenant Fee Ban Means for Landlords
What you can and cannot charge for, in addition to the rent for your property, has changed dramatically. The first big change is that landlords cannot charge fees associated with letting the property and will have to cover these expenses themselves. There are some exceptions to what can be charged:
· When it comes to the deposit on the property, this is capped at five weeks’ rent for most properties. If the yearly rent is over £50,000, the landlord can ask for six weeks’ rent.
· A holding deposit can be charged but this is capped at just one weeks’ rent and it must be refundable.
· Default fees can be charged under certain circumstances. Loss of keys is one and charging on a default of rent payment is another, as long as the default is more than 14 days.
· If the tenant asks for a change to the tenancy agreement, the landlord can charge up to a maximum of £50 to cover administration costs.
· Landlords can charge an early termination fee but this is capped at the cost incurred.
The rules apply to all new tenancies. For tenancies that were in effect before the Act was introduced, landlords will have until 1st June 2020 to comply with the new regulations.
Landlords have already seen their costs squeezed in recent years with changes to taxes and the introduction of new stamp duty rules. There is a general consensus that the ban will result in higher rents, but the average increase is set to be far less than many tenants were paying in additional fees under the old system.
What it Means for Tenants
The changes mean it should now be cheaper for tenants to rent a property and they will no longer be subject to some of the more exorbitant charges from certain sections of the industry. Unfair fee charges have long been a problem within the rental sector.
If you are looking for a property to rent, the landlord or letting agent cannot charge you for referencing, ask for guarantor fees, charge you administration fees or charge you a check out fee when you leave a property.
It’s important if you think that you are being charged a fee that is on the banned list that you seek advice. If your tenancy started before the 1st June 2019, some of the new rules will not apply. For example, you may have been charged more for your deposit, but the cap cannot be applied retrospectively and you can’t be reimbursed.
Tenants may face future higher rents in some areas of the country as landlords try to recoup their costs. However, the fee ban has been in effect in Scotland since 2012 and the impact has been less conclusive when it comes to rental hikes.
This article is meant as a generic reference. For full guidance for landlords, letting agents and tenants please refer to the Tenant Fees Act https://www.gov.uk/government/collections/tenant-fees-act