Changes to tenant fees from June
The Tenant Fees Act will come into force on 1 June 2019, with the effect of banning or restricting fees charged by landlord and letting agents to tenants.
On 12 February 2019, the Tenant Fees Bill received Royal Assent. The Tenant Fees Act contains provisions which will ban landlords and their agents in England from charging fees such as for inventories, references or credit checks, whilst capping other fees, such as for holding deposits and security deposits. The relevant provisions will come into force on 1 June 2019 for new and renewal leases and licences (excluding periodic tenancies). From 1 June 2020, the Act will apply to existing leases and licences.
From 1 June 2019, landlords and letting agents will only be able to charge the following:
- Utilities and council tax (if included within the tenancy)
- A refundable security deposit, capped at five or six weeks’ rent (depending on cost of annual rent)
- A capped refundable holding deposit (at no more than one week’s rent)
- Fees for changes to the tenancy requested by the tenant, capped at £50 (or “reasonable costs”).
- Fees for early termination of the tenancy requested by the tenant.
- Tenant default fees, such as fines for late rent payments or lost keys (capped at “reasonable costs”)
There is also a ban on setting rent at a higher level for the first portion of the tenancy and dropping it down afterwards. The Act applies to assured shorthold tenancies and residential licence (with limited exceptions); social housing and long leases are exempt from the Act.
Terms which breach these provisions will not bind the tenant. Failure of landlords and letting agents to comply with legislation creates a civil offence. The fine for the first offence is a civil penalty of £5,000 with penalties up to £30,000 and even criminal penalties for any further breach.
To some, the reform will be seen as welcome or even overdue, helping to prevent the extortionate fees charged by a small minority of letting agents and landlords. However, the changes for the majority of landlords and letting agents should be welcomed as a way of enhancing the reputation of those offering a fair and high quality service to tenants.
More than 4.5m UK households are in privately rented accommodation and it is estimated that renters could save an average of £272 from June. It remains to be seen, but some have speculated that letting agents may seek to recoup this lost income elsewhere, possibly through higher costs to landlords or higher overall rent charges.
It is expected that government guidance on the Act will be published shortly.