Tenant Fee Ban Update

28/1/2019 7:16 PM

I just wanted to put out a 'short' post about the tenant fee ban, it's set to become law from the 1st June 2019. This will mean different things for different people, but I've been surprised by the amount of Landlords who haven't heard about the ban. This may be because they feel it doesn't impact them, but unfortunately it does.

Purpose of the ban:
In the Governments eyes this will make the industry fairer. Allowing tenants to freely choose properties without fees potentially forcing them to choose a property which is less suitable. The Government also feel that this will force agents to be more competitive, however I'm already aware that most agents have increased their costs to Landlords.

Prohibitions:

The tenant must not be required to make a payment in order to be considered for a tenancy, or renewal of an existing tenancy. This means that things like application fees, referencing fees and renewal fees will no longer be permitted.

The tenant must not be required to enter in to a contract with any third party supplier, in order to be considered for a tenancy, or renewal of a tenancy. This means that it will not be possible to write in to the contract that a tenant have the carpets professionally cleaned at the end of the tenancy in order to allow pets (for example).

Permitted payments:
Rent
Although permitted, there are restrictions. For example you cannot inflate the rent for the first six months of the tenancy in order to cover lost fee income.

Tenancy/Security Deposit/Bond
This will be capped at 5 weeks rent where the annual rent is less than £50,000. Or 6 weeks rent where the rent exceeds £50,000)

This is calculated as follows:

((Rent x 12) / 52) * 5. I.e. a property with a rent of £500 will have a deposit of no more than £692.31.

Holding Deposit (please see 'holding deposit rules' later in this post)
In order to prevent tenants applying for multiple properties Landlords & Agents are able to take a holding deposit. The deposit must not exceed the equivalent value of one weeks rent.

Tenant Default Payments
Tenant default charges are limited to:

  1. Non-payment of rent. Calculated daily after 14 days, which is capped at 3% per year plus the Bank of England base rate.
  2. Loss of keys or security devices.

All costs must be reasonable, and must be clearly outlined in the tenancy agreement. Furthermore you may be required to provide evidence to prove that your costs are not excessive.

Tenancy amendment fee
Capped at £50 (or the reasonable costs of the person conducting the work, whichever is less).

Early termination of tenancy
This is permitted where a tenancy is ended early at the tenants request. Early termination is defined as:

  • The tenant leaving during a fixed term
  • The tenant leaving during a periodic tenancy without giving the prescribed notice period (in most cases, one month)

The amount is limited to the 'loss suffered by the Landlord' or the 'reasonable costs incurred by the Agent'.

Council tax/Utilities/Telephone/Broadband/TV licence
Payment of utilities are permitted payments, but you cannot force a tenant to use a specific supplier. The tenancy must clearly state that utilities are the responsibility of the tenant.

Holding Deposit Rules
Holding deposits are capped at one weeks rent. You calculate this as follows:

(Rent x 12) / 52. I.e. a property with a rent of £500 would have a holding deposit not exceeding £115.38.

Holding deposits are almost always refundable to the tenants and can only be held for a maximum of 15 days.

The cases in which holding deposits must be refunded are as follows:

  1. The Landlord & Tenant enter in to a tenancy agreement,
  2. the Landlord decides before the deadline not to enter in to an agreement with the Tenant,
  3. or the Landlord & Tenant fail to enter in to an agreement before the deadline expires.

The deposit must be repaid within 7 days of:

  1. The date of the tenancy agreement,
  2. the date upon which the Landlord decides not to proceed, or
  3. the deadline for agreement.

Where repayment is required due to a tenancy starting, the holding deposit can be used as part payment of the first months rent or security deposit.

Cases where you can retain the holding deposit:

  1. Where the tenant does not have the right to rent in the UK, and the Landlord/Agent could not have reasonably known this before taking the deposit.
  2. Where references reveal detrimental information, or the tenant has provided false or misleading information.
  3. The tenant notifies the Landlord/Agent before the deadline that they no longer wish to proceed.
  4. Where the Landlord/Agent have taken all reasonable measures to enter in to an agreement wit the Tenant before the deadline, but the Tenant fails to do so.

It's important to note that if there are ANY breaches of the 'Tenant Fees Act' you are unable to retain ANY part of the deposit, even in the above circumstances. Furthermore if the Agent or Landlord act in an improper way towards the tenant and they decide not to move in as a result, you cannot retain any of their holding deposit.

The latest draft of the bill can be seen here.

If you have any questions about the fee ban, or how it may impact you please feel free to give me a call on 01455 360048 or 02475 240180.

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