It’s getting close. The 1st June 2019 is the day the Tenant Fees Act comes into effect. It means that landlords and their representative agents will no longer be able to charge tenants a variety of fees that have become a common part of the rental landscape. It’s been a long time coming in an area where tenant groups feel they are unnecessarily charged high rates for doing very little. But that is not the only measure put in place.
What Does the Tenant Fees Act Mean?
Aside from the ban on lettings fees under all sorts of names, it also means the following measures come into force:
- Tenancy deposits will be limited to the maximum of the equivalent of 5 week’s rent
- So-called holding deposits (where prospective tenants make a down payment as a promise to sign a contract) to the equivalent of 1 week’s rent
- All fees are banned except those related to contractual default (leaving early etc)
These measures are backed up with fines. For a first offence, any landlord insisting on such fees or asking for higher than the deposit caps will be fined a maximum of £5,000 for their first offence. A second subsequent offence will result in fines of £30,000.
Why are They Doing This?
Some concern has been expressed for years of the number of fees and charges that tenants are expected to pay. Tenant groups argue that such fees are business costs that should be charged against a tax burden and not asking tenants to pay. These include but are not limited to administrative fees, referencing fees, inventory fees, and or check in fees, even letters for late payment of rent will no longer be permitted.
What Else do Landlords Need to Know?
As noted above, there are a couple of exceptions based on contractual default that landlords will continue to be legally permitted to charge in the result of failure of contractual obligation. These are:
- Late rent fees but changes to how this is charge is very strict. You may charge 3% plus the BoE base rate but as this is an annual rate, you will need to work out the annual equivalent rate based on the actual number of days
- When the tenant loses their keys, you have a right to charge for the cost of a replacement key set and will need to prove the cost to you for reimbursement. No fines are allowed
Clauses for both costs must be listed in the contract.
Where holding deposits are concerned, there is a limit of 15 days to hold this money unless explicitly agreed in writing. However, there is some flexibility on how it may be used. It could be offset against the first month’s rent, against the security deposit, or simply refunded.