First mentioned by Chancellor Philip Hammond in his Autumn Statement of 2016, the Tenant Fees Act 2019 was passed in February this year and came into play on 1 June 2019. Despite the Conservative party not supporting this ban on tenants’ fees, with the argument that tenants will be no better off due to anticipated increases in rents as a result, the new rules have been pushed through by the government to increase transparency in the rental market.
The new rules apply to all Assured Shorthold Tenancies (ASTs), including student lets and properties let on licence, signed after this date. The Act explicitly states the payments can then be charged in connection with a tenancy and include the following:
- Rent and the cost of utilities;
- A tenancy deposit (restricted to no more than 5 weeks’ rent);
- A holding deposit (capped at one weeks’ rent);
- A fee for changing the tenancy agreement (if instigated by the tenant only);
- A fee for early termination of the tenancy agreement (if instigated by the tenant only);
- A fee for late payment or lost keys.
Payments for damage are also allowed on the basis these are a breach of the tenancy agreement, but the new rules are designed to ensure landlords cannot present exaggerated bills to tenants.
Any other payments requested by a landlord from a tenant are now treated as ‘prohibited’ payments, including such fees as administrative fees, credit check fees, and tenancy renewal fees. Provisions requiring the tenant to arrange a professional clean at the end of the tenancy or to hire a gardener have also been outlawed. The removal of these ‘hidden’ payments and fees are estimated by the Treasury to save tenants across England £240m a year, or £70 per household.
The government seem to be prepared to act on those landlords that do not apply the new rules with the threat of initial fines of £5,000, increasing to £30,000 or a criminal record. At headline level, these new rules are expected to be initially welcomed by tenants, and will be seen as another blow for landlords in the private rented sector. However, the work undertaken by the property agent is now expected to be charged as a fee to the landlord and then covered by an increase in the amount of rent. The new Act prohibits rental hikes in an initial period to cover the fees associated with a new tenancy, but not for an increase in the rent for the duration of a tenancy agreement. Agents are expected to reassess the market following the introduction of these rules and may well recommend to landlords to increase their rents to cover some or all of this additional charge. Similar rules for Wales are expected to come into effect this Autumn and a similar ban on letting fees have been in force in Scotland since 2012.
If you would like to discuss Tenants Fees with us in more detail or if you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with your local representative.
This article featured in issue 13 of our construction and real estate newsletter series. Read the full newsletter here: Real Estate Matters – Issue 13