Tenant fees Ban
From 1st June 2019, landlords and letting agents will no longer be able to charge tenants fees for many of the things they used to charge for.
The Tenant Fees Act controls what payments landlords or letting agents can ask for in England. Basically, ALL payments are prohibited unless it is a payment for something that is expressly allowed for under the Act.
It’s a certainty that letting agents will look to make up the fees they used to charge tenants, by charging landlords more.
So what is changing?
Under the new laws, agents and landlords can only charge tenants for the following items, in connection with a tenancy:
b) A refundable tenancy deposit, capped at no more than five weeks’ rent, if the total annual rent is less than £50,000, or six weeks’ rent if the annual rent is £50,000 or over. (We strongly advise landlords to always arrange for a thorough, independent inventory to be done at the start and end of the tenancy, so they will be able to make deductions from the deposit in the event of damage to the property, missing items or anything else that can be classed as more than fair wear and tear. Always charge up to the maximum five or six weeks, as it may be prove a useful set-off against unpaid rent).
c) A refundable holding fee of no more than one weeks’ rent, once you’ve agreed to let to a tenant. (This will give you a little protection against voids, if the tenant changes their mind, last minute, leaving you in the lurch!)
d) Amendments to the tenancy agreement, if requested by the tenant – and capped at £50, unless you can justify a higher expense.
e) Payments associated with the ending of a tenancy before the stated end date of a tenancy agreement, when that early ending was requested by a tenant.
f) Payments for utilities, TV licence, council tax and communication services.
g) Default fees for late payment of rent and replacement of a lost key or other security device, where this is stated and allowed for in the tenancy agreement.
Letting Agents Fees Will Increase – So Will Rents
As letting agents can no longer charge tenants for such services, their costs will be passed onto landlords by way of increased fees. In response, landlords are very likely to raise rents. There is evidence this happened in Scotland, when tenant fees were banned, some years ago.
Landlords who use letting agents to find tenants and manage their tenancies ought to be having a conversation with their letting agent now – to find out if and when their fees will rise.
Where landlords decide they must increase rents, they have to give a month of notice (where the rent is paid monthly) or 6 months notice (for those rare cases where rent is paid just once a year).
Most tenancies will allow for rents to be reviewed annually.
Of course, landlords should remember that all letting and managing agency fees are deductible against rental income for tax purposes.
Landlords, faced with increased letting agency Tenant Find and Tenant Management fees might like to start thinking about doing the job of “Tenant Find” and “Tenancy Management” themselves.
Both our two books for landlords cover in clear and simple language how to do this. There are links to both books at the bottom of this page. The “Successful Property Letting” book covers both tenant find and management (as well as a whole lot of other stuff), while the book, “Buy to Let Landlords Guide to Finding Great Tenants” is focussed just on the tenant-finding process.
Both books explain how to do it all yourself, without using a letting agency and both look at the pros and cons of using a letting agent – and how to find a good agent (and avoid a duff one).
Tenant Fees Ban – Was It Needed?
Was the tenant fee ban really needed?
No it was not, in my opinion, if the government had acted with more sense.
My blog, from 2016, explains that previous tenant fee transparency laws were being routinely ignored by individual letting agents.
I said back then that the government should, in response, have forced the big PORTALS to be clear about fee transparency and started dishing out fines on them. There are only two really big portals – Rightmove and Zoopla and pretty well all letting agents have to use them for their adverts to be seen by the public. Fines placed on the main two portals would have been easy to manage and soon the message would have got through to the actual letting agents – Clean up your act, be more transparent, or we will ban you from placing adverts on our portals.
But this opportunity was missed. And so, the government decided to ban pretty much all fees charged to tenants – which is why the Tenant Fees Ban law has been passed now. See the link to my 2016 blog, here:
Tenant Fees – The Losers Will be….
Losers from the cap on deposits will be more “risky” tenants – those who landlords judge to be more likely to not pay rent. It can take 5 to 6 months to secure possession if it goes all the way to a bailiff. So with deposits capped at five weeks, landlords will be even less likely to let to risky tenants. And for some landlords, this will be another straw on the camels back, making them sell up, thus reducing the available housing.
Pet owners will find it harder to find accommodation too. Previously, landlords could charge a higher deposit, where there was going to be a cat or dog in residence. They will not be able to now, so their owners will probably find more landlords will just say “no” to them and their animals.
Existing Tenancies and The Tenant Fees Ban
Tenancies which started before 1st June 2019 will not be affected. Neither will landlords with existing tenancies, (pre June 1st 2019), necesarilly have to pay part of deposits back, where that deposit was more than the new cap of five or six weeks’ rent. However, they will, if the tenancy is renewed. So our advice to landlords is to let existing tenancies simply run on as contractual periodic tenancies or statutory periodic tenancies.
Services for Private Landlords
We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk. Our advice is completely independent. We take don’t commission payments or fees from anyone, ever.
Services to Businesses and the Public Sector
We advise a range of organisations too to help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.
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