In May 2019 we highlighted changes coming into force regarding unfair fees charged by letting agents (Tenant Fees Act 2019: Letting Fee Ban Comes into Force 17th May 2019). In this article, we look at the impact on landlords in more detail.
What does the new legislation mean for landlords?
The Tenant Fees Act 2019 came into force on 1st June 2019, radically changing the fees that a landlord can charge their tenants. As a consequence, some costs that previously might have been recovered from tenants may now have to be borne by the landlord.
The provisions apply to tenancies created on or after 1st June 2019 and to all tenancies, whenever granted, from 1st June 2020. It is important that landlords familiarise themselves with the changes that have been introduced.
The Act applies in England only to assured short term tenancies (excluding social housing and long leases), student accommodation tenancies and licences to occupy housing in the private rented sector.
The Act will ban a landlord (or letting agent) from requiring a tenant to make certain payments in connection with their tenancy. A landlord will only be able to charge tenants if it is on the list of “permitted payments”. These include:
- a) There are provisions to prevent “front-loading” of rental payments to recoup costs.
- b) A refundable deposit. This is money held as security against performance by the tenants of their obligations.
The amount has been reduced and the maximum that a landlord will be able to request is
- if the annual rent is less than £50000 the maximum is five weeks rent
- if the annual rent is £50000 or above the maximum is six weeks rent
Landlords must continue to ensure that they comply with the requirements of the tenancy deposit scheme legislation.
- c) A refundable holding deposit to reserve the property, capped at one week’s rent.
- d) Utilities and council tax if included within the tenancy.
- e) Defaults by the tenant, such as fines for late payment of rent or lost keys. Fines for late rent payments are capped at a rate of 3% above the Bank of England base rate. Penalties for lost keys must be reasonable and evidenced.
- f) Changes to the tenancy requested by the tenant. These are limited to either £50 or the “reasonable costs” of the landlord.
- g) Early termination of the tenancy requested by the tenant.
Landlords found charging a “prohibited payment” could be fined £5000 for a first offence. If a second offence is committed within five years this is a criminal offence with a potentially unlimited fine.
Local authority trading standards officers have a duty to enforce the Act.
Landlords should consider reviewing and updating their standard tenancy agreements and keep records of any payments requested from their tenants, including supporting invoices so that they can be justified at a later date.
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