TENANT FEE BAN: HOW WILL IT AFFECT LANDLORDS AND LETTING AGENTS?

A new law has come into force this month that is set to shake up the private renting market by prohibiting letting agents and landlords from charging tenant fees, says Paul Barnes lettings specialist and Director of Loveitts.


What Is The Tenant Act?


Implemented on June 1st 2019, the Tenant Act puts a ban on tenant fees, which applies to new or renewed tenancy agreements signed on or after this date, while also capping tenancy deposits paid by tenants in the private rental sector in England. 


What Are The Benefits Of The Tenant Act?


 As a result of the ban, tenants will now no longer face fees for services including viewings, credit checks, references and when setting up a tenancy.


 The Act also restricts security deposits to the equivalent of five weeks rent for rental properties costing less than £50,000 per annum, or six weeks for higher-cost rented properties. Additionally, if rent is outstanding for more than 14 days then letting agencies are permitted to impose a penalty charge limited to 3% higher than the Bank of England’s base rate – which currently stands at 0.75%.


 Holding deposits are limited to one week’s rent but renters who have signed a tenancy agreement prior to June 1st may still face charges and fees in their contract over the next twelve months. 


 By introducing the act, the government’s primary aim is to reduce the costs that tenants can face at the outset and during their tenancy, whilst also ensuring that at a glance prospective tenants are able to see what a property will cost them in terms of rent with no hidden costs.


Breaking The Tenants Act


Those who are seen to be in breach of the ban will be punished with a financial penalty of up to £5,000 and further breaches within five years of the first offence will be hit with a fine of up to £30,000.


 Loveitts are members of the RICS and ARLA PropertyMark and have rigorously developed, improved and changed our procedures to ensure that they are fully compliant and in line with new legislation. It is a seismic shift for the industry in terms of working practices but we are confident of these new laws after months of thorough preparation.


 Paul Barnes commented: “Now that the Tenant Fees Act has kicked off across England, it is essential that letting agents, landlords and renters are aware of how this regulatory change will affect them.


 “For renters, it is imperative that you are aware of your rights during a tenancy to ensure that both landlords and letting agents are compliant with these rules and are not continuing to charge fees that were deemed acceptable prior to the Acts’ enactment on June 1st but are now no longer permitted.


 “Similarly, for landlords and letting agents, it is crucial that you adhere to these new laws. Breaching the ban will result in huge fines that could stretch to the tens of thousands for repeated offences.  Further, the offending landlord will be unable to service an s21 notice until the prohibited payment has been refunded to the tenant.


 “It must be highlighted that tenants will still face some upfront fees. For instance, they still will be expected to pay the first month’s rent and a deposit and there can be charges for lost key replacements and if rent is outstanding for over 14 days.


 “Additionally, tenants who have signed an agreement before June 1st also may be subject to certain charges so seeking the appropriate advice with regards to this would be advisable if it applies.”