Over the last few weeks we’ve had lots of calls about the changes to tenant fees that were introduced at the beginning of June 2019. Here we aim to answers some of those questions.
What is the Tenant Fees Act 2019?
The Tenant Fees Act 2019 outlines the Government’s approach to banning letting fees paid by tenants in the private rented sector and capping tenancy deposits.
The ban on tenant fees came into force on 1 June 2019 and applies to all Housing Act tenancies.
It limits deposit sums to the equivalent of five or six weeks’ rent, depending on the annual rental amount, and restricts the type and value of tenancy charges which tenants can be asked to pay by landlords or agents.
What impact does the Fee ban have on me, the Landlord?
Most Landlords understand that if agents are not able to charge fees to tenants, then it is likely that agents will be passing on these fees to Landlords. We are trying to find ways to prevent this, whilst maintaining quality of our service to Landlords. Previously our tenant administration fees were low by industry standards, so the impact we are feeling is not as pronounced as for other letting agencies. We will be reviewing our fees in six months, but at the moment our fees to Landlords are unchanged.
While we cannot charge a fee for processing a tenant’s application, we can charge a holding deposit equivalent to one week’s rent. This is to demonstrate a tenant’s commitment to rent a property. This deposit is fully refundable to a tenant once the references are passed and the agreement has been signed. The only reason this deposit is not returned is where a tenant provides false or misleading information, fails his right to rent, withdraws from the proposed agreement or fails to take all reasonable steps to progress the referencing, such as not responding to requests for information. When the tenancy is entered into the holding deposit goes towards the first month’s rent.
Does the Act only ban Agency Fees?
What Landlords are not so aware of, however, is that the Tenant Fees Act also prohibits requiring tenants to pay third party cost, such as insurance, professional cleaning, gardening, gutter clearance or chimney sweeping. If the Landlord wishes these things to be carried out by specific third parties, the Landlord should arrange for them to be carried out and include this service in the tenancy agreement and understand that cost will come out of the rent.
Leaving the property professionally clean
This does not mean that a tenant should not leave the property clean. The tenancy agreement will require the property to be returned to the same condition that it was at check-in.
The basic premise of the tenant fees act is that the Landlord should not be worse off due to a tenant’s action or inaction, but will not be able to penalise a tenant unfairly.
Does the Tenancy fee apply to all Tenants?
These changes only apply to Assured Shorthold Tenancies and not to tenants who have another principal home, or who are company tenants.
Do I have to refund the dposit early, due to the deposit cap?
From 1 June, we are not able to hold any deposits in excess of 5 weeks (for rents up to £50k per year or 6 weeks (for rents between £60k and £100k per year) for new tenancies or renewed tenancies and any excess has to be paid back to tenants. This is not the case if the tenancy is allowed to roll onto a statutory periodic tenancy.
If you are unsure of any of the changes please do give us a call and we’ll be happy to help.