Tenant Fees Act: All You Need to Know

Landlords and tenants can sometimes have problematic relationships. Whereas landlords are primarily responsible for ensuring that their rental properties are fit to live in, tenants may have their own expectations about how much they’re being charged to live there.

There has recently been a number of government changes that have had a direct impact on the relationship between landlords and their tenants too. The latest in the string of changes came into law on June 1 2019 – the Tenant Fees Act.

It’s been a somewhat controversial change with some landlord groups arguing against it, but here’s everything you need to know, whether you’re a landlord or a tenant…

Everything you need to know:

What fees are banned?

It is now illegal for letting agents to charge fees to tenants unless they are covered by a small number of exemptions, which are called “permitted payments”. These exemptions are:

  • Rent, council tax, gas, electricity and other utility bills
  • Security deposits
  • Holding deposits
  • Late payment fees

Fees for changing a tenant or ending a tenancy early

Agents and landlords can no longer charge fees for any other aspect of the tenancy, including: administrative fees, charges for reference checks, fees for check-ins and check-outs or ending tenancies within the agreed timeframe of the contract, and renewal fees for extending a tenancy.

So, what can be charged for deposits and other “permitted payments”?

For a holding deposit, a maximum of one week’s rent can be charged. This can be retained by the landlord or agent if the tenant withdraws from the tenancy, fails any of the Right to Rent immigration checks that are now required, or if the tenant does not sign and return their rental agreement within 15 calendar days or by the date agreed.

For a security deposit – which is used to cover the cost of damage or missed or late payments during the tenancy – a maximum of five weeks rent can be charged. If, however, the annual rent is over £50,000 a year, a maximum of six weeks rent can be charged.

Landlords can charge interest at the Bank of England Base Rate plus an extra 0.75% if a tenant falls behind with rent by more than 14 days, and now if a tenant loses a key the landlord can only charge the actual cost of the replacement.

Can landlords still charge for contract changes?

Landlords can still charge for some contract changes – but only if they are requested by the tenant.

Landlords can agree to change any of the wording in the contract terms for a maximum charge of £50 including VAT, and a maximum charge of £50 to change the names of any of the tenants on the contract can be levied when someone moves out.

Tenants who wish to move out before the end of the agreed contractual date will be liable for the landlord’s costs in re-letting the property and will have to pay any outstanding rent until the replacement tenancy begins.

But what about tenancies that were agreed before June 1?

Landlords and their letting agents can charge fees that were previously agreed before June 1, but only up until 31 May 2020 – when these will also be banned. All tenancies that are agreed or renewed are now subject to the new rules and restrictions.

Tenants who were charged an upfront check-out fee for contracts that ended or will end after June 1 must be refunded.

As you’ll see there is a lot of new information to digest whether you’re a landlord or a tenant. So, whether you’re a current landlord, potential landlord or current tenant looking to break out of the rental cycle, seeking professional advice can be very important.

If you’d like to discuss the options available to you, contact your adviser today.

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