The tenant fee ban is probably the biggest piece of legislative change in the industry since the Housing Act in 2004. And it’s going to have a marked effect on the private rented sector.
The 2019 June 1st ban on letting agent fees
In summary, the Act is a total ban on fees and charges to tenants in the private rented sector. This fee ban applies to start a tenancy, renew a tenancy, during a tenancy, or to end a tenancy.
The government state their aim is to reduce the costs that tenants face at the outset, and throughout, a tenancy. As well as to balance the landlord and tenant relationship to make it fairer for tenants to rent in this country.
The law will apply to tenancies agreed and signed after 1 June 2019. If you have a current tenancy already active on 1 June, then you can charge fees until 31 May 2020. Although from 1st June 2020, the Act applies to all tenancies thereafter.
Here’s how the new tenant fee ban will impact you
Outlined below is a summary of what the law states are permitted payments. As well as examples of prohibited payments.
Permitted payments summary – allowed under the Act
- Rent – either inclusive or exclusive of utilities and services but these must be included within the rent payment or the tenancy agreement and agreed before the tenancy commences.
- A holding deposit of no more than 1 weeks rent. Once this is paid, a landlord must take a property off the market and commence referencing. If the tenant gives false or misleading information, or they decide to cancel their application the holding deposit will be retained by the agency.
- A deposit of no more than 5 weeks rent for tenancies where the annual rent is up to £50,000.
- A change to a tenancy agreement, called a Novation of contract, is capped at £50.
- A fee to be released from a tenancy, by way of mutual surrender, not exceeding the landlord’s costs or rent that is outstanding. (Note: An example of this, would be the letting fee that you would pay us to re-let the property).
- A default fee where rent is more than 14 days late, calculated by working out the interest overdue on the rent at 3% above the Bank of England interest rate.
- The cost to replace a lost or stolen key or fob.
- Damages and breaches of contract if you have suffered a loss, or you can demonstrate that you have had to pay something out (when a tenant is responsible) are allowed. You must have written evidence, and all costs must be reasonable. You may be able to charge £15 an hour if you can prove this to be the hourly rate of you, or somebody within an agency acting for you, to put right a breach. You can also only claim from the tenant the cost it will be to make good the breach of tenancy and no more.
For more information, I highly recommend you read the guidance notes released by the government. These guidelines may be able to answer a lot of queries you may have. You can see them here.
So what happens next?
It’s difficult to predict exactly what the fee ban will do to the market, but we do expect rents will rise in the long term as a result of the ban. Likely due to the increase in costs for the landlords.
Furthermore, landlords may look to sell their buy to let properties. This in turn could create more competition, and therefore further drive the cost of rents up.
It could also be seen as an opportunity for some landlords who could monopolise their position if they retain their portfolio and offer high quality property in an area where other landlords have sold.
For tenants, it will certainly make it easier for them in the short term to rent a property as their initial upfront costs will be lower.
Although the Tenant Fee Act is going to affect us Homesale Homelet will do our best to stay competitive and as ever continue to help our landlords as much as we can.
If you’d like to arrange an appointment to discuss the fee ban with me, or to talk about anything else property related, then please don’t hesitate to email me firstname.lastname@example.org or call me on 07974 145566. Or indeed pop into our offices at 18 Grosvenor Street, CH1 2DD.