Unexpected letting fees and high deposits can make properties harder for people to afford and are often not clearly explained upfront- leaving many prospective tenants unaware of the trust costs of renting property.
The Tenant Fees Bill, which received Royal Assent on 12 February 2019, puts an end to costly fees imposed by landlords or agents on tenants and prospective tenants of assured shorthold tenancies and student accommodation.
From 1 June 2019, all new and renewed tenancies will come under the scope of the new ban. All existing tenancies will be brought under the new rules from 1 June 2020.
So what has it actually restricted?
For security deposits, if the annual rent is less than £50,000, the deposit cannot exceed five weeks’ rent. If the rent is £50,000, the cap will be six weeks’ rent. Landlords also may not set a rent at a higher level for the first part of the tenancy and then reduce it later, in an attempt to recoup costs indirectly. Furthermore, holding deposits must not exceed one week’s rent and must be fully repaid.
In relation to other charges, the Tenant Fees Act limits these to payment for loss of keys or late payment of rent, normal charges for variation, assignment or novation of tenancies, early termination by the tenant, council tax, utilities, TV licenses and communication services.
Under the Act, landlords and agents are only able to recover reasonably incurred costs from tenants and must provide evidence of these costs before they can impose charges.
This will put a stop to, for example, tenants being charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace.
The government believes this will save tenants in England £240m, or £70 per household.
James Brokenshire MP comments: “Tenants across the country should not be stung by unexpected costs from agents or landlords”
Any terms which breach these provisions will not bind the tenant or the licencee and the offending party may incur a fine of up to £5,000. If a second breach is committed within five years, a criminal offence is committed and a fine and banning order may be imposed. Alternatively, the enforcing authority may impose a civil penalty up to £30,000. Tenants and licencees can recover money wrongly paid, and landlords will be unable to serve section 21 notices to terminate tenancies whilst holding prohibited payments. Trading standards authorities (TSAs) and district councils will enforce the provisions.
The Act extends the duties of letting agents to online property portals like Rightmove and Zoopla. In addition, responsibility for enforcing mandatory client money protection scheme membership will move to TSAs.
The Act is part of a wider package of government reforms aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, better quality and more affordable private rent market.
At Farleys, we can assist with any of the issues covered in this article, please call our residential property team on 0845 287 0939 or submit an enquiry through our website.