The fee ban is probably the biggest piece of legislative change in the industry since the Housing Act in 2004 and is going to have a marked effect on the private rented sector.
In summary, the Act is a total ban on fees and charges to tenants in the private rented sector to start a tenancy, renew a tenancy, during a tenancy or end a tenancy. The government state their aim is to reduce the costs that tenants can face at the outset, and throughout, a tenancy and balance the landlord and tenant relationship to make it fairer for tenants to rent in this country.
The law will apply to any tenancies agreed and signed after 1 June 2019. If you have a current tenancy already active on 1 June then you can charge fees until 31 May 2020 and from 1 June 2020 the Act applies to all tenancies thereafter.
Below is a summary of what the law states are permitted payments and then give some example prohibited payments.
Permitted payments summary – allowed under the Act
- Rent – either inclusive or exclusive of utilities and services but these must be included within the rent payment or the tenancy agreement and agreed before the tenancy commences.
- A holding deposit of no more than 1 weeks rent. Once this is paid, a landlord must take a property off the market and commence referencing. If the tenant gives false or misleading information, or they decide to cancel their application the holding deposit will be retained by the agency.
- A deposit of no more than 5 weeks rent for tenancies where the annual rent is up to £50,000.
- A change to a tenancy agreement, called a Novation of contract, is capped at £50.
- A fee to be released from a tenancy, by way of mutual surrender, not exceeding the landlord’s costs or rent that is outstanding. (Note: An example of this, would be the letting fee that you would pay us to re-let the property).
- A default fee where rent is more than 14 days late, calculated by working out the interest overdue on the rent at 3% above the Bank of England interest rate.
- The cost to replace a lost or stolen key or fob.
- Damages and breaches of contract if you have suffered a loss or can demonstrate that you have had to pay something out when a tenant is responsible are allowed. You must have written evidence and all costs must be reasonable. You may be able to charge £15 an hour if you can prove that is the hourly rate of you or somebody within an agency acting for you to put right a breach. You can also only claim from the tenant the cost it will be to make good the breach of tenancy and no more.
For more information I would highly recommend you read the guidance notes released by the government and they may be able to answer a lot of queries you may have. You can see them here.
What happens next?
It’s difficult to predict exactly what the fee ban will do to the market but we do expect in the long term rents will rise as a result of the ban as fees increase for landlords. Furthermore, landlords may look to sell their buy to let properties which could create more competition and therefore further drive rents up. It could be seen as an opportunity for some landlords who could monopolise their position if they retain their portfolio and offer high quality property in an area where other landlords have sold.
For tenants, it will certainly make it easier for them in the short term to rent a property as their initial upfront costs will be lower.
Although the Tenant Fee Act is going to affect us Homesale Homelet will do our best to stay competitive and as ever continue to help our landlords as much as we can.
If you’d like to arrange an appointment to discuss the fee ban with me, or to talk about anything else property related, then please don’t hesitate to email me email@example.com or call me on 07974 145566. Or indeed pop into our offices at 18 Grosvenor Street, CH1 2DD.