More than two years after it was first mooted, Lord Bourne of Aberystwyth last week confirmed the ban on tenant fees would come into force in June.
The new legislation will impact landlords, tenants and lettings agents, so here is the Parkers verdict on what we can expect from the tenant fees ban…
Who the tenant fees ban will affect
Primarily the ban will impact on lettings agents and landlords, with both no longer able to charge tenants fees from June.
The legislation affects landlords and agents in England and Wales, but the Welsh version of the ban could be slightly different to the English regulations.
Will the fees ban apply only to new tenancies?
Yes and no! The tenant fees ban applies to all new or renewed tenancies after June 1 2019.
Existing tenancies signed before that date will only be subject to the fees ban from June 2020, where fee clauses in tenancy agreements pre-June 2019 will become void.
What fees are banned under the regulations?
Although there are still some fees that tenants could face (more on that below), the main fees that will be banned from June 1 include:
* ‘Admin’ fees
* Credit check fee
* Inventory fee
* Other ‘services’ fees (gardening, professional cleaning, de-flea)
* Guarantor form fee
* Cleaning services fee
* Referencing fee
What fees can still be charged under the ban?
It might seem obvious, but rent is clearly still allowed to be charged! As well as that, landlords and agents will still be able to take holding deposits, main deposits and some default fees after the tenant fees ban has come into force.
But deposits and holding deposits will be capped under the new rules, with 12-month tenancies of less than £50,000 in rent seeing landlords and agents able to charge a maximum of five weeks’ rent as a deposit.
Year-long tenancies of more than £50,000 in rent can see a deposit of six weeks’ rent taken.
Holding deposits will be restricted to a maximum of one week in rent. Should the landlord not proceed with the tenant, or a period of 15 days pass with no decision, the holding deposit must be returned in full to the tenant within seven days.
If the tenant decides not to proceed with the property, a holding deposit does not need to be repaid in full.
Default fees refer to tenants who fail to pay rent on time or lose the keys to a property. Landlords and agents can charge a fee in these situations, although they, too, are capped.
Moreover, landlords will need to prove costs incurred in writing and with receipts. A maximum of 3% above the Bank of England base rate can be charged to a tenant whose rent is late, with the charge effective from the day payment was due.
A cap of £50 applies to agents or landlords who wish to charge a fee to tenants making changes to tenancy agreements while in a property, unless a landlord can prove in writing that their costs exceed this amount.
What about deposit deductions?
Landlords can still make reasonable deductions from tenancy deposits for damage to property beyond fair wear and tear or outstanding rent owed by a tenant.
Deposits still need to be lodged with one of the three deposit protection schemes, whose rules for returning deposits at the end of tenancies still apply.
What are the punishments for charging banned fees?
Any tenants charged fees banned under the new legislation will be able to claim back their money through the county court, with landlords or agents charged daily interest.
More concerning for landlords and agents should be the fines available to Trading Standards for breaches of the tenant fees ban.
First-time offenders can be hit with fines of up to £5,000, while repeated offenders could face £30,000 fines.
Meanwhile, landlords will be unable to issue section 21 eviction notices if banned fees have been charged to their tenants and not paid back in full.
Parkers’ advice for landlords and tenants:
Simon Gregory of Parkers Tilehurst says: “I think there will be a higher turnaround in properties come June 1 as it will be much cheaper for tenants to be able to move and this will hopefully create a higher demand.
“Given the recent and incoming tax changes, short-term profits for landlords have decreased considerably, but as a long-term investment and with the capital growth property offers I personally think property remains one of the best long-term investments you can make.”
Mark Brooker of Parkers Reading added: “I think the lettings market will continue to be strong and over a period of time, rents will begin to increase gradually to off-set the inevitable additional costs that landlords will incur.
“My advice to landlords is ‘don’t panic’, as some may find themselves a little better off in the long term.”
Content based on current draft of the Tenant Fees Bill (December 11, 2018). Should the draft bill change, this piece will be updated.
