Tenant Fee Ban: Guidance for landlords
- From 1st June 2019, landlords and agents are no longer able to charge a number of fees in England for new tenancies signed on or after that date.
- Only ASTs, student accommodation, and licences are caught by the ban. Company lets and non- assured tenancies will be exempt.
- Breaching the fees ban will be a civil offence with penalties of up to a £5,000 fine. Successive breaches within a five year period will be a criminal offence with an unlimited fine.
What fees are banned?
Anything not permitted, 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 shorthold 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 then would be:
- 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 fees will still be permitted?
Holding deposits, rent, deposits and charges for defaulting on the contract are all exempted from this ban.
However, all four are subject to additional restrictions as part of the legislation and landlords will need to be mindful of these changes.
In addition, most required payments to third parties are prohibited, however, a landlord can require the tenant to use a specific utility or communications provider. Agents are not allowed to require this however.
Finally, landlords may charge for changing tenants or allowing tenants to vacate the property early. This is subject to restrictions on costs however.
Why is this change being made?
The Act has come about as a result of pressure being applied to politicians to improve the circumstances of renters, given the large increase in numbers of people renting in the UK. Certain agencies have been seen to abuse their position and charge particularly onerous fees to tenants in return for very little, such as simply renewing a tenancy agreement. The ban is intended to counteract this type of practice.
The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy, and is part of a wider package of measures aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector.
Tenants will be able to see, at a glance, what a given property will cost them in the advertised rent with no hidden costs. The party that contracts the service – the landlord – will be responsible for paying for the service, which will help to ensure that the fees charged reflect the real economic value of the services provided and sharpen letting agents’ incentive to compete for landlords’ business.
What are landlords afraid of?
- Some agents passing on the fees to landlords. For instance, one agent, MakeUrMove, has already said it will charge landlords an extra £12 per month to cover services including tenant referencing, rent collection and advertising on portals such as Rightmove and Zoopla.
- Councils are tasked with enforcement and landlords have voiced fears that some tenants, especially those with large rent arrears or the ‘tenant from hell’ whom every landlord fears, may try to enlist overworked councils to threaten landlords with £30,000 fines and being placed on a ‘rogue landlords’ register.
How to survive the fee ban?
- The Tenant Fee Ban will increase the importance of the Inventory a tenant signs at the beginning of every tenancy. You will still be able to make deductions for any damage caused during a tenancy or a room being returned in an unclean condition as long as it can be clearly evidenced.
- Now is the time to ensure that your inventory system is robust enough to allow you to definitively prove the condition of the room at the beginning of the tenancy, using photos and a written description is advisable.
- Make sure you remove ALL upfront charges for referencing and check in/check out from your marketing material, including your Ideal flatmate advert. Consider the benefit of doing this now which will allow you to market your rooms with ‘NO Upfront Fees’.
- If you use an Agent to market your property make sure they are also in compliance.
- If you currently charge any fees review your rents when a room becomes available where possible and feasible. Consider that an increase of only £5pcm over a six- month tenancy could cover the cost of referencing.
Top Tips From Gertie Owen
Professional landlord and ‘Landlord of the Year’ winner