Landlords and letting agents – are you complying with the Tenant Fees Act?
Now the Tenant Fees Act 2019 is law and became enforceable as of June 1, landlords need to make sure they are compliant.
Although it has been under discussion for some time, having first been raised in Parliament as a draft bill in 2017, we are finding there is still a lack of clarity among some landlords as to what the changes mean for them and what they are now legally bound to do.
Initially, this will only apply to new tenancies and renewals of existing agreements, although from June 1 next year, it will apply across the board. Broadly speaking, as a landlord, there are six permitted charges you can make of tenants:
- A refundable holding deposit of one week’s rent
- A refundable deposit of five weeks’ rent, in which the holding deposit can be included. If annual rent is over £50,000 then six weeks’ rent can be taken
- Default fees for late payment of rent and charges for lost keys or security fobs
- Tenancy contract changes when requested by the tenant, capped at £50, or ‘reasonable costs incurred’
- Payments associated with early termination of the tenancy when requested by the tenant.
You also have the option of charging for:
- Council tax
- Broadband and telephone line
- TV licence
- Utilities including water, electricity, gas etc (although you cannot sell these for more than the cost price).
However, ensure you are transparent when it comes to any additional charges or commissions, documenting everything carefully, to ensure you do not unwittingly fall foul of the new legislation.
However, under the new Act you can NOT make additional charges for:
- Mandatory professional cleaning
- Credit checks
- Reference checks
- Guarantor fees
Many of these now-prohibited charges have previously been widely used, and to prevent any attempts to recover these initial costs, the Act prevents you ‘front loading’ the rent at the start of a tenancy; neither can you raise the rent a few months into the tenancy, or offer a discounted initial rate. However, for longer tenancies with a rent review clause, you still have the right to raise the rent in accordance with the contractual agreement.
Now the Tenant Fees Act is enforceable, a landlord or agent taking a prohibited payment will have 28 days to return it, or be considered in breach of the legislation. Fines can be up to £5,000 for a first breach, but subsequent occurrences can be criminal offences and can carry a penalty of up to £30,000.
For landlords operating new or renewing tenancies, it is essential you are now compliant. For those with pre-existing tenancies, you have a year before the legislation formally affects you, but the next 12 months must be seen as an opportunity to get your house in order.
As with any new law, there can be initial uncertainty about what exactly you understand your obligations to be, but ignorance is no defence, so ensure you are compliant. For anything you are unsure of, seek advice from a professional at the earliest opportunity.