Tenant Fee Ban - Landlords what do you need to know?

The Tenant Fee Ban Bill has received Royal Assent and will become law from June 1st 2019. The Bill has been much debated and discussed. But, for landlords managing their own tenants and property, what exactly does the new Bill mean for them and what details of their existing tenancy agreements and processes will need to change?

We’ve created a quick list of Landlord need-to-knows, to help you understand exactly what you can and can no longer do, once the new Tenant Fee Ban becomes law.

Fees you can no longer charge a tenant

For many years, it’s been common practice for landlords and letting agents to charge tenants an array of fees when a new tenancy is agreed. Thanks to the incoming new Bill, most of those fees will have to be paid by the landlord or letting agent.

As of June 1st 2019, tenants can no longer be charged for:

  • References.
  • Right to rent checks.
  • Pet deposits.
  • End of tenancy cleaning or gardening costs.
  • End of tenancy inventory check-out.
  • Tenancy renewal fees.

If you do charge your tenant for any of these, you could face a fine of up to £30,000. To avoid falling foul of the new rules without realising it, you should go through all your tenancy agreement paperwork and amend any details relating to charges for any of the services listed above.

Even if you charge the tenant by mistake, if they report your activity to trading standards, you could still face a hefty fine.

New deposit rules

With regards to deposits, the new Bill will mean changes for some landlords. Specifically, the Tenant Fees Ban Bill states:

  • A tenancy deposit must be no larger than five weeks rent (where the annual rent is £50,000 or under).
  • A holding deposit cannot exceed one week’s rent and can only be held for a maximum of 14 days, where it must be refunded in full, within seven days if the landlord backs out of the agreement. If the tenant backs out of the agreement or has given misleading information, the holding deposit doesn’t need to be returned.

Where an existing tenancy deposit exceeds 5 weeks, when the tenancy agreement is renewed, the landlord must refund the additional deposit above the five-week total.

If you sign a new tenancy agreement before June 1st, you can still charge a higher deposit and you won’t need to issue a partial refund to your tenant to bring it down to the threshold, until you next renew the tenancy agreement.

How can I recoup the cost of new tenancy services?

Under the new Bill, landlords and lettings agents cannot charge a higher first months rent to recoup the costs associated with welcoming a new tenant into a rental property. With regards to pets, landlords and letting agents are also not permitted to charge a higher deposit, as this constitutes a fee that is banned by the new Bill.

If landlords feel the new rules will have a notable impact on the costs of bringing a new tenant into their property, the only real option open to them, is to increase the monthly or weekly rent. This is the main potential problem that has been identified by some groups that could occur as a result of the Tenants Fees Ban.

Of course, if it a landlord raises the rent too high then the property may no longer be attractive to potential tenants. However, if all landlords follow suit, then average rents will rise and demand should remain intact.

What fees are permitted by the Bill?

While the majority of new tenancy fees will be banned from June 1st, some fees will still be permitted, although they will mostly be capped to ‘reasonable charges’ and must be accompanied by proof. Fees landlords will still be permitted to charge their tenants, post June 1st include:

  • The replacement of any lost keys.
  • Bank charges relating to late payments.
  • Charges relating to a tenant ending a tenancy early, or where a change of tenant is made, again, outside the existing tenancy agreement.

The new Bill has been designed by Parliament to help make renting in the private sector, specifically moving between homes, more affordable, with no hidden charges to pay on top of the deposit and rent.

If you need more details on the Bill, all details are available on the Government website, here.

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