It has been officially announced that the Tenant Fee Ban will come into effect on June 1, 2019. In order to ensure you and your clients are as prepared as possible, here is a guide will act as a primer for both landlords and agents to help them prepare for the upcoming changes.
This guidance is based on legislation that has not yet come into force. Landlords and agents should be aware that it remains subject to change – although we will do all that we can to ensure we keep you up to date on these changes.
What is the Tenant Fee Ban?
For those of you who aren’t aware, the Tenant Fee Ban refers to some new legislation that aims to make renting fairer for tenants. It isn’t in force yet, but it will apply to all new tenancies formed on or after 1st June 2019.
The Bill mostly deals with fees charged at the start of a tenancy. But it also covers deposits, renewal fees and check-out fees.
However, Landlords can still charge fees where they’ve incurred costs because of the tenant’s actions. These kinds of charges must now have supporting evidence, like invoices.
The government held a consultation on the Fees Bill that included landlords, tenants and letting agents. Agencies that support these groups like the NLA, RLA and Shelter were also involved.
Will it Apply in England and Wales?
Yes, the Tenant Fee ban is set to apply to letting agents across both England and Wales, however, it should be noted that they are separate jurisdictions for this purpose. They are both passing their own versions of the legislation. There will be differences between them in terms of details, especially around enforcement. This note is directed toward the English legislation.
Will the fees ban apply to older tenancies?
Not immediately. It will apply to renewals of tenancies, excluding statutory and contractual periodic tenancies that arise after the Tenant Fees Act comes into force.
After one year, the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective. If a landlord or agent takes a prohibited payment after that date they will have 28 days to return it or be considered in breach of this legislation.
What can Landlords charge fees for once the Bill has passed?
Once the ban comes into full force, the only fees that Landlords will be able to charge for are:
- refundable holding deposits
- security deposits
- charges for changing the tenancy including the tenant wanting to terminate the agreement early
- charges for defaulting on the tenancy agreement such as late rent payments or charges for replacing a lost key
- Utilities – where applicable
So, Which fees are banned?
Anything not exempted, that the tenant (or someone acting on their behalf like a guarantor or parent) is required to pay as a condition of the ‘grant, continuance, assignment, termination or renewal’ of an assured short-hold tenancy or licence agreement.
This includes payments to third parties, either for services throughout the tenancy or for specific performance of a job and loans from third parties.
In short, this means that pretty much any fee that is in the tenancy agreement will be void unless it is exempt.
Examples of banned fees:
- Charging for a guarantor form
- Credit checks
- Cleaning services
- Professional cleaning
- Having the property de-flead as a condition of allowing pets in the property
- Admin charges
- Requirements to have specific insurance providers
- Gardening services
What happens if I charge an illegal fee?
Well for a start, tenants will be able to claim any money they shouldn’t have paid via the County Court.
Trading Standards will be enforcing the legislation and will issue a fine of up to £5,000 for a first offence. If you charge another illegal fee within 5 years of the initial fine, you’ll face prosecution or fines of up to £30,000. You may also be subject to a banning order under section 14 of the Housing Act 2016.
While Trading Standards will be enforcing the Bill, letting agents will also face tighter regulations. Letting agents can currently operate without any qualifications or professional oversight. The Bill doesn’t introduce these tighter rules for letting agents. It’s something the government claims will come shortly after the Bill.
The new rules for letting agents mean that they’ll now have to meet minimum training requirements. They may also have to abide by an industry code of conduct and show they are compliant with the new rules.
What tenancy types does this legislation apply to?
What do I need to be thinking about before the ban comes in?
Landlords and agents will have to consider their current business models carefully. The prohibition on fees will impact heavily on some business models and this is likely to lead to increasing rents or heavier costs to the landlords.
Agents can reduce impact by simply being prepared. Review business practices, and ensure you put effective administration and management tools into place. Professional and comprehensive Estate Agency Software can often alleviate some administration worries.
Similarly, it is vital that landlords and agents consider whether their current tenancy agreements and holding deposit forms are fit for purpose once the new legislation comes into force. The RLA will be updating our documents to ensure compliance with the ban on fees prior to it coming into force. We would urge any of our members to use the new documents once they are published.