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June 04, 2019

The Tenant fee ban explained

What is it:
As you might already be aware, the Tenant Fees Act is a ban on charging tenants certain fees at the start of a tenancy. The act also enforces a cap on deposits.

When will this happen?
The Act comes into effect on the 1st June 2019.

Why is it being introduced?
The government aim to rebalance the relationship between tenants and landlords, to deliver a fairer, good quality and more affordable private rented sector. It will allow individuals to see, at a glance, what a particular property will cost them.

How will it affect tenants?
The ban should mean that the initial outlay when taking on a new tenancy will be reduced. The ban applies to all assured shorthold tenancies, tenancies of student accommodation, and licences to occupy housing in the private rented sector in England. Most tenancies in the private rented sector are assured shorthold tenancies. If you’re already in a tenancy agreement then you will still need to pay fees associated with that tenancy up until 1st June 2020, after this time no such fees can be charged.

When you enter into a new tenancy after 1st June 2019, the landlord or letting agent will not be able to charge fees for things such as referencing and admin. You will still need to pay a deposit, your rent, and potentially default fees should you default on the contract. You may also need to pay a holding deposit.

The bad news is that it is likely that landlords will increase rent in order to cover their losses.

How will it affect landlords?
In short, landlords and agents will no longer be able to charge certain fees. This will mean a drop in income from each new tenancy. In order to make up for this loss many landlords will increase rents.

A list of fees landlords can charge can be found below:

  1. The rent.
  2. A refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above.
  3. A refundable holding deposit (to reserve a property) capped at no more than one week’s rent.
  4. Payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher.
  5. Payments associated with early termination of the tenancy, when requested by the tenant.
  6. Payments in respect of utilities, communication services, TV licence and council tax.
  7. A default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement

Any fees paid before the ban comes into effect on the 1st June will not need to be paid back. If a tenant is already in a tenancy you will still be able to charge fees written into that tenancy up until 1st June 2020.

What do we recommend?
If you’re a tenant, we recommend ensuring you check what charges and fees are written into your current tenancy and when taking on a new tenancy, we’d recommend that you only do so through a reputable agency.

If you’re a landlord, we recommend that you use an agency to manage your property, to ensure you stay up to date and compliant with the latest changes to legislation. There are additional, numerous benefits to using an agency, these include dealing with maintenance issues, finding and checking prospective tenants, and carrying out regular visits.

Sab have been managing property for 60 years and have a team of experienced and helpful staff ready to help. If you would like to chat to a member of the Sab team about letting your property, give us a call on 01223 352 170.

You can find detailed information about the act here:
https://www.gov.uk/government/publications/tenant-fees-act-2019-guidance