Tenants’ fees sent packing

‘Generation Rent’ are all too familiar with the various fees that are charged in connection with renting a new home which can total hundreds of pounds. These can include: letting fees, viewing fees, credit-check fees, inventory fees, cleaning fees, check out fees, referencing fees and holding deposits, and all of these fees are in addition to paying a rent deposit to the landlord.

However, all of this changed on 1 June 2019 when the new Tenants Fees Act 2019 (“the Act”) came into force with the intention of reducing the cost of renting from the outset.

What fees are permitted under the Act?

The Act prohibits all fees in connection with a tenancy unless they fall within one of the following permitted payments:

• Rent;
• Payments in respect of council tax, utilities, communication services or a TV licence;
• A refundable tenancy deposit capped at five weeks’ rent where the annual rent is less than £50,000;
• A refundable holding deposit to reserve a property, capped at one week’s rent;
• A fee for certain changes to the tenancy capped at £50, or more if it is reasonable;
• A fee for ending the tenancy early if this is at the tenant’s request;
• A fee for the loss of a key/security device;
• A fee for the late payment of rent where the rent has been outstanding for more than 14 days; and
• Fees for breaching a tenancy agreement.

What are the sanctions?

The Act makes it illegal for a landlord or letting agency to ask a tenant to pay any fee which is not included in the above list. (It does not matter whether the fee is actually paid – making a request for a prohibited payment is an offence in itself).

A breach of the Act will be a civil offence and the offending landlord or letting agent may be fined up to £5,000 for each breach. If a further breach is committed within 5 years, this will be a criminal offence, and an unlimited fine may be imposed.

Comment

The legislation is part of a series of recent measures aimed at re-dressing the balance in favour of tenants, and many welcome the ban on tenants’ fees, recognising that the cost of renting is disproportionate. On the other hand, there is a concern that landlords may simply increase rents to recover such additional costs: but at least that would only affect tenancies that are concluded, and not ones where the deal does not go ahead.

There is also a wider issue, in that this is part of a series of changes over the last few years (such as loss of mortgage interest relief; 3% additional stamp duty land tax on buy-to-let purchases; right-to-reside verification duties) which make it less attractive to become a buy-to-let landlord, and there must be questions as to what impact this will have on the housing market over the next few years.

Given that these new measures, if you are a landlord who is concerned about charging fees, or a tenant who has been asked to pay a prohibited payment, our property litigation team are here to help.