The tenant fee ban explained

Posted: 17th May 2019

Landlords face yet another increase in their normal operating costs come the 1st of June, when the Tenant Fees Act 2019 comes into force.

After that date, it becomes illegal for landlords or their letting agents to charge fees to new and renewing    tenants for a wide range of services, reiterated by the Residential Landlords Association (RLA) in an article dated the 1st of May, such as:

  • credit reference checks;
  • drawing up and conducting Inventories;
  • administrative charges;
  • cleaning services;
  • gardening maintenance;
  • the charging of a fee for compulsory professional cleaning services at the termination of a tenancy; or
  • for providing a written reference on behalf of a former tenant.

The tenancies covered by the new law

At the moment, the new law will apply only to new tenancies and the renewal of existing tenancies, with the exception of statutory and periodic tenancies determined by contract after the 1st of June 2019.

One year from now, however, the ban on tenant fees will extend to all tenancies, including pre-existing ones.

Deposits

In addition to the ban on fees, the new legislation also limits the amount that landlords and their agents may charge for deposits.

From the 1st of June, the maximum deposit that may be requested – if the annual rent is less than £50,000 – is the equivalent of five weeks rent. If the annual rent is more than £50,000 maximum deposits are set at the equivalent of six weeks rent.

Holding deposits are also restricted to a maximum of one week’s rent. The legislation regarding the repayment of such a deposit if the tenancy does not go ahead is awaiting the statutory legislation.

The cost to landlords

The financial cost to many landlords should not be underestimated. In a story published by the Financial Times on the 13th of February 2019, it was estimated that when taking into account all the fees that may currently be charged, landlords and their agents are collecting anywhere from £40 to £813 – with an average in London of around £400 for a two-person household.

The correspondent in question revealed that she had recently paid £90 per person for reference checks, £180 on an administration fee, and a further £198 payable when she moves out on termination of the tenancy – a total of £360.

Any landlord or agent in breach of the new law – who illegally charges a tenant fee – may be ordered by the courts to repay the tenant and be fined up to £5,000 for a first offence. If further breaches are subsequently made, the fine may rise as high as £30,000.

Pressure groups have already argued on behalf of landlords and letting agents that an inevitable consequence of a ban on charging tenant fees directly is likely to be an increase in rent to recover the lost revenue.

Wales

The Tenant Fees Act applies only to England. The Welsh Assembly has recently passed similar legislation, which will come into force on the 1st of September 2019.

Scotland

Very similar legislation – the Housing (Tenancies) (Scotland) Act 2016 – is already in force north of the border.