As a landlord of a residential property or a letting agent in the residential property sector, are you fully aware of the latest legislation around the Tenant Fees Act that came into force in England this year?
What is the Tenant Fees Act?
Any new tenancy agreement taken out from 1 June 2019 in England and 1 September 2019 in Wales, must adhere to the new rules. From these dates, landlords and estate agents are no longer able to charge ‘admin fees’ to tenants before and during their tenancy. The new Act was brought in to protect tenants from hidden costs that were charged in addition to rent and the deposit (these are also now subject to new rules).
Which fees are allowed under the new rules?
- A refundable holding deposit (up to one week’s rent)
- Tenancy deposit (see below)
- Tenancy changes (eg. introduction of a pet, permission to run a business or other contractual amendments)
- Utilities, council tax, TV licence, telephone/broadband
- Early termination of tenancy/surrender fee
- Default fees written into the tenancy agreement (eg. for late payment of rent and replacement of locks/security fobs)
Which fees are prohibited by the Act?
- Property viewing fees
- Referencing fees
- Administration charges
- Guarantors fees
- Inventory checks
- Right to Rent checks (unless the tenant fails the check)
- Pet fees/deposits
- Renewal/exit fees
- Interest on permitted payments
- Professional end of tenancy cleaning (except in breach of contract)
- Third-party fees (unless undertaken by the tenant)
- Gardening services (unless included within the rent)
How does the Act affect tenancy deposits?
Where the total annual rent is less the £50,000, deposits are capped at no more than 5 week’s rent and for annual rents of £50,000 – £100,000, the cap is 6 week’s rent. The tenant’s deposit must be held in a government-backed tenancy deposit protection scheme (there are three to choose from) within 30 days of the payment being taken.
What are the penalties for breaching the Act?
Non-compliance can result in serious consequences with a fine of up to £5,000 per fee. If a further breach is committed within five years or if there is a conviction for another breach, this becomes a criminal offence incurring a banning order and an unlimited fine. In addition, landlords and agents are unable to evict a tenant until they have repaid the unlawful fees.
For a full list of allowable costs and to see how it may affect your business, there is a useful HMRC guide to follow. Alternatively, contact the property experts at CRM with your queries on 01865 379272.