The world of property rentals can be a minefield for novice landlords. With so many legalities, obligations, and policies to adhere to, it can be particularly challenging to keep abreast of recent changes in legislation. One such change that has had a profound impact on both landlords and tenants is the Tenant Fees Act 2019, commonly referred to as the tenant fee ban. This legislation was implemented in England to provide a fairer system for tenants, limiting the fees that landlords and letting agents can charge.
Understanding this ban and how it impacts your responsibilities as a landlord is crucial to ensuring a smooth tenancy process and avoiding potential legal disputes. This article serves as a comprehensive guide for new landlords to understand and comply with the tenant fee ban in England.
Understanding the Tenant Fee Ban
The Tenant Fees Act 2019 was introduced in England on June 1st, 2019, and applies to all tenancies signed on or after this date. The intention behind this legislation was to reduce the costs that renters can face at the outset, and throughout a tenancy.
The ban prohibits landlords and letting agents from charging certain fees in connection with a tenancy. It applies to most private tenancies, including assured shorthold tenancies, tenancies of student accommodation, and licenses to occupy housing (the main exception being long leaseholders and those with agreements allowing the landlord to live in the property).
What Can and Can’t Be Charged
One of the most fundamental aspects of the tenant fee ban that landlords need to grasp is what can and cannot be charged. Prior to the ban, tenants could be charged for a range of services, such as reference checks and inventory reports. However, under the ban, these practices have been outlawed.
Landlords can only require tenants to make payments in connection with a deposit, rent, and certain default fees. A refundable tenancy deposit is capped at no more than 5 weeks’ worth of rent where the annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above.
Default fees can only be charged for late payment of rent (over 14 days late) and replacement of a lost key or security device giving access to the housing. The fee for late payment of rent will be capped at 3% above the Bank of England base rate.
Compliance with the Tenant Fee Ban
Being aware of the tenant fee ban is one thing, but ensuring compliance is another. Non-compliance with the ban can result in hefty fines, so it’s essential that landlords understand exactly what is required to stay within the law.
Landlords and letting agents can no longer charge fees for services such as viewings, credit checks, references, and the drafting of legal documents. If a landlord or letting agent takes a holding deposit from a tenant, the amount taken must not exceed one week’s rent and must be refunded to the tenant (unless the tenant fails a right to rent check, provides false or misleading information, withdraws from the property, or fails to take reasonable steps to enter into the tenancy within 15 days or other agreed date).
Changes to the Tenancy Agreement
The tenant fee ban also has implications for the tenancy agreement itself. If a term of the tenancy agreement requires the tenant to make a banned payment, that term of the agreement will not be legally binding. The rest of the agreement will continue to apply.
Landlords must not require tenants to contract with a third party for services or for insurance. There are only two exceptions to this rule: provision of utilities (including broadband) and council tax.
The Impact on Landlords
While the tenant fee ban was primarily introduced to protect tenants, it also impacts landlords and letting agents. With the ban on many fees, landlords are faced with two options: either absorb these costs themselves or find alternative means to cover these expenses.
For many, this has meant slightly increasing rents to cover the costs previously recuperated through fees. It is advisable for landlords to transparently communicate these changes to prospective tenants, explaining that while upfront costs are reduced, this may result in slightly higher rent.
The tenant fee ban was a major shift in England’s rental sector. While it may initially seem daunting for new landlords, understanding and complying with the ban is not only a legal requirement but also helps to foster a good relationship with tenants. Proactively educating yourself about these legislative changes, you’ll ensure your property business operates lawfully and ethically.
Tenant Fee Ban Enforcement
The enforcement of the tenant fee ban is taken very seriously. The Trading Standards authorities in England are responsible for enforcing the ban. If a landlord or letting agent is found to have broken the rules, the authority can issue a penalty of up to £5,000 for a first offence. If they break the rules again within 5 years, they could be hit with an unlimited fine.
Banned fees are treated as a prohibited payment. If a landlord or letting agent takes a prohibited payment, they have 28 days to return the prohibited payment or they will be in breach of the legislation. If a tenant has been asked to make such a payment, they should report it to the local Trading Standards department.
For disputes regarding the return of holding deposits, tenants can contact the relevant deposit protection scheme. All holding deposits must be protected in a government-approved deposit protection scheme, and disputes about their return can be resolved through the scheme’s dispute resolution service.
In order to avoid any issues, it’s advisable for landlords and letting agents to maintain thorough records. This includes copies of tenancy agreements, evidence of any permitted payments, and any communication with tenants related to payments. This can also be useful in case of disputes.
Conclusion
The tenant fee ban represents a significant change in England’s rental market. By prohibiting landlords and letting agents from charging certain fees, it aims to reduce the financial burden on tenants. However, it also poses new challenges for landlords, particularly new or inexperienced landlords who may be unfamiliar with the legislation.
Despite the initial adjustment, complying with the tenant fee ban is crucial. Not only is it a legal requirement, but it also demonstrates a commitment to fairness and transparency, fostering a positive relationship with tenants.
Landlords and letting agents must familiarise themselves with the stipulations of the Tenant Fees Act 2019. This includes understanding what constitutes a banned payment, how to handle holding deposits, and the changes to the tenancy agreement. It’s also important to keep in mind the potential penalties for non-compliance.
The world of property rentals can be complex, but understanding and following the law is an essential part of being a landlord. By staying informed and adapting to changes in legislation, landlords can ensure they are fulfilling their legal obligations and creating a fair and equitable environment for their tenants. In the long run, this will contribute to the success and sustainability of their property business.