The Tenant Fees Bill received Royal Assent on 12 February 2019 to become the Tenant Fees Act 2019. The Act, which will come into effect on the 1 June, will restrict the fees that landlords and letting agencies can charge tenants in the private rented sector in England. The Act also extends to online property portals such as Zoopla or Rightmove, following the amendment of the Consumer Rights Act 2015.
The aim of the bill is to provide more transparency on fees for tenants in order to reduce initial costs at the outset of the tenancy.
What fees will the Tenant Fees Act 2019 restrict?
The Act will put a cap on security and holding deposits and details the limitations of what landlords and agents are able to charge their new or existing tenants.
Under the new Act:
- Holding deposits will be capped at no more than one week’s rent (in most circumstances)
- Security deposits will be capped at five weeks’ rent for tenancies less than £50,000 a year. If the annual rent exceeds £50,0000 then the cap will be set at six weeks’ rent.
Aside from rent and deposits, landlords and agents will only be allowed to charge tenants fees for:
- A change, novation or assignment of a tenancy when requested by the tenant (capped at £50 or reasonable costs)
- Early termination of the tenancy
- Utilities, Council Tax and the provision of a communication service such as internet or a landline
- Certain contractual default payments arising from the tenant such as replacing lost keys or late payment of rent
The new Act does not remove the landlord’s right to be able to claim damages if there is a breach of the tenancy agreement.
What are the penalties for infringement of the new Act?
If a landlord or letting agent is found to be in breach of the Act, it will be considered a civil offence and carries a fine of up to £5,000. If a landlord or letting agent has been fined or convicted of the same offence within the last 5 years, then it will become a criminal offence, or alternatively they can face a fine of up to £30,000.
Any money raised through penalties will be reserved by the local authorities for future local housing enforcement.
How will the new measures be enforced?
All Local Trading Standards organisations will be appointed to oversee and police the new measures.
All new tenancies agreed from 1 June 2019 must comply with the new regulations. There will be a 12-month transition period for existing tenancies, meaning that any tenancies agreed before the 1 June 2019, will not be required to comply with the new rules until 2020.
How will the Tenant Fees Act 2019 affect landlords?
As a landlord you should make sure that any tenancy agreements you have are up-to-date. Recent research suggests that the new fees ban will cost landlords £83 million in the first year, so it is important to consider the financial impact this new Act will have on your costs.
The Act states that landlords are prohibited from increasing their rate of rent in the initial months of a tenancy and then reducing it as a way to recoup the fees they would have usually charged. However, there is currently no law to say that landlords are prohibited from raising their rents on their properties in order to recover any income lost from the new fees ban.
Letting agents will also be financially impacted, which could result in them raising the commission charged to landlords which will, in turn, impact upon landlords’ costs.
Get advice on how to prepare for the Tenant Fees Act 2019
If you’re a landlord looking for advice and support ahead of the new Tenant Fees Act, Preston Redman’s property solicitors have the knowledge and expertise to help guide you through the transition. To make an enquiry, call us on 01202 292 424 or alternatively, fill out our enquiry form at the top of this page.