Last year, on 1st June 2019, the government released new guidelines for UK landlords concerning letting and admin fees. These new guidelines, the ‘Tenant Fees Act’ state that all letting fees previously paid by tenants in the private rented sector, are now banned, and must be covered by the landlord. Landlords that breach these new rules, will be faced with a fine of £5,000. According to GOV.UK, if the landlord is found to breach these rules again within 5 years of the initial breach, ‘local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.’
The new legislation applied to all new contracts agreed after 1 June 2019. But as of 1 June 2020, it now applies to all tenancy contracts in the private rented sector.
Why did the Government introduce the Tenant Fee ban?
It’s been widely reported for years that tenants incur unreasonable, unfair, and hidden additional costs when moving into a new property, with, according to Citizens Advice Bureau, as many as 42% of renters borrowing money, just to afford these unexpected tenancy costs alone. This ban aims to provide transparency so that from the outset, renters can easily understand the costs associated with their tenancy agreement and budget accordingly.
There is no doubt that this ban is welcomed especially by the student population, who could save up to £700 per household with these changes to student accommodation tenancies.
What fees are banned?
The ‘Tenants Fee Act’ states that certain fees can no longer be charged. If the landlord is using a letting agent and being charged for the below services, the landlord is responsible for covering these costs, and can’t pass these costs onto the tenants. Of course, landlords are within their right to increase the monthly rent to cover these costs, if outside an existing tenancy agreement.
Fees that are now banned:
- Pre-tenancy fees, including viewing and administration fees
- Tenancy set-up fees, including the right to rent checks, referencing, pet fees, and check-in inventory reports
- During tenancy fees including gardening services and third party costs.
- Exit fees including contract renewal fees, and check-out inventory reports.
What fees remain?
Whilst many fees have been banned, some fees which the government have deemed fair and appropriate still remain. The obvious costs like monthly rent, utilities such as gas, water, and electricity, and council tax are still the tenants responsibility (unless the contract is agreed as all bills included).
Landlords can also reasonably charge:
- A holding deposit to secure the property. This is usually the equivalent of one week’s rent and must be fully refunded to the tenant.
- A fee for early termination of the contract, when the landlord can demonstrate additional costs such as readvertising the property, referencing fees, and check-in / check-out report fees.
- Late payment of rent (at 3% above base rate)
- Replacing lost keys, up to £50 depending on the type of key.
- Tenancy Deposit fees. These fees still need to be legally protected under a deposit protection scheme such as the DPS within 30 days, however, these fees are now capped at the equivalent of 5 weeks rent when annual rental totals under £50,000. Evidence that the deposit has been protected must be provided to the tenants as soon as possible.
So, whilst letting your home is a great way to secure additional income, it also comes with its challenges and stresses. Government rules and regulations change in this sector regularly, and any breaches could result in heavy fines of up to £30,000.
This is where City Relay can help. We are proud to be London’s most trusted property management agency, offering an all-in-one service to our landlords including liaising with tenants, contract negotiations, protecting deposits, and best practice advice for you as the landlord. Find out more about our services and pricing or contact us now to find out how we can help you manage your property.