What does the Tenant Fee Ban mean?

In recent years there have been so many changes to the regulations for renting out property that it can be quite challenging for tenants and DIY landlords to keep up with everything. One of the most important of these changes has been the introduction of the Tenant Fees Act 2019 (which is sometimes referred to as the Tenant Fee Ban, the Tenant Fee Bill or even the Letting Agent Fee Ban), and came into effect on 1st June 2019. Whether you are a landlord or tenant, it is important to fully understand how this new law will affect you. Check out Belvoir’s tenant fee ban update to help you find out more and ensure that you are remaining legally compliant…

What is the Tenant Fee Act?

In summary, The Tenant Fees Act was introduced by the Government on 1st June 2019, and basically means that landlords and letting agents are banned from charging many of the ‘extra’ letting fees that tenants were previously charged for (see below for more details). In some areas these tenant fees could potentially have added around £300 to the cost of renting.

What Letting Fees are now banned?

The Tenant Fee Ban means that, apart from rent, landlords and letting agents are now prohibited from charging tenants for many of the costs associated with letting a property. These lettings fees include:

  •  Referencing and guarantor checks

  •  Inventory checks

  • Credit checks

  • Administration fees

  • Viewings – tenants cannot be charged for looking at a prospective rental property.

  • Check out fees

  • Renewal of tenancy agreements. .

The Tenant Fees Act 2019 has also capped the size of deposits that landlords and letting agents are able to ask for (see below). Penalties have been introduced for those landlords and letting agents who flout the new rules, and there is a potential fine of up to £5000 for first-time offenders.

What does the Tenant Fee Ban mean for landlords?

The Tenant Fee Ban means that landlords will now have to cover many of these expenses themselves. There are some exceptions to these costs, which include:

  • Deposits being capped at five weeks’ rent for most properties. However, if the yearly rent is over £50,000, the landlord is able to ask for six weeks’ rent.

  • A holding deposit (to reserve a property) can be charged, but this is capped at just one weeks’ rent, and must be refundable.

  • Default fees can be charged under certain circumstances. Loss of keys is one of these exceptions, and charging on the default of a 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 is able to 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.

If any of the above charges apply, they must be fair and considered to be reasonable amounts for the required work. Written evidence of the work should be provided to tenants.

Deadline for Tenant Fee Ban compliancy!

These rules apply to all new tenancies. For those tenancies that were already in effect before the Tenant Fee Act 2019 was introduced, landlords had until 1st June 2020 to comply with the new regulations, so the deadline for this has now passed. If you are a landlord and you are concerned that you may not be fully compliant in any aspect of the management of your property, please call your local Belvoir office for a free chat with the local business owner or an experienced member of their team, who will be very happy to advise.

Landlords have already seen their profit squeezed in recent years, mainly due to changes in taxation and the introduction of new stamp duty rules. Because of this there is a general consensus within the industry that the tenant fee ban may result in higher rents, as landlords attempt to recoup their costs, but average increases are likely to be far less than many tenants were paying in additional fees under the old system. The Tenant Fees Ban has been in effect in Scotland since 2012 and the impact of this has not been conclusive when it comes to rental increases, but there have certainly been no sharp spikes.

What does the Tenant Fee Ban mean for tenants?

The Tenant Fee Ban means that it should now be cheaper for tenants to rent a property, as tenants will no longer be subject to the more exorbitant and unfair charges applied by less scrupulous sections of the industry.

As already stated, your landlord or letting agent will now no longer be able to charge you for referencing, guarantor fees, administration fees or a check out fee when you leave a property. If you are a tenant and think that you may have been illegally charged a fee that is on the banned list it is important to seek clarity as soon as you can by writing to the landlord or letting agent. You can also check out the Citizens Advice website (www.citizensadvice.org.uk) or contact your local authority for further advice and information on how to dispute a fee for which you think you have been wrongly charged.

If your tenancy started prior to 1st June 2019, some of the new rules will not apply. For example, you may have been charged more for your deposit in the past, but the new cap cannot be applied retrospectively and you cannot be reimbursed.

We hope that this article has been helpful, but please note that it is meant as a quick 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. You can also find out more by visiting https://www.belvoir.co.uk/articles/impact-of-the-tenant-fees-act-2019