Whether you’re a buy-to-let landlord or someone who lives in a rental property, you’ll probably be well aware that the Tenancy Fees Act comes into force on Saturday, June 1 2019.
The aim of the Act is to reduce the costs tenants face from the outset - and throughout a tenancy - to ensure the private rented sector provides good quality homes in a fairer and more affordable way.
This major change affect landlords, letting agents and tenants – and means it’s now illegal for certain fees to be charged.
At Garness Jones, we’ve been fielding a number of calls about the new legislation – so we’ve put together this easy-to-read advice guide to help you understand what it means for you.
The latest rules imposed as a result of Tenancy Fees Act 2019 apply to ALL assured shorthold tenancies (ASTs) in England.
A tenancy is likely to be classed as this if ALL of the following apply:
Social housing (or long leases) and tenancies for student accommodation are excluded from the Tenancy Fees Act.
From 1st June 2019, the only payments a landlord or lettings agency can charge in connection with a tenancy are…
1. The rent: An obvious charge which should be arranged in advance and detailed in the assured shorthold tenancy (AST) agreement.
2. Refundable protected tenancy deposits: By law, the maximum amount that can be taken is now capped at 5 weeks’ rent (when annual rent is less than £50,000) – and this must be protected in an approved scheme (as per the current regulations).
3. Holding deposits: These can still be used to hold a property – but the amount is limited to a week’s rent. It must be refunded if the tenant signs up for the property.
If a tenant provides misleading and/or false information and they do not sign an AST, a landlord can keep the holding deposit in certain circumstances.
The proposed tenant must be written to within 7 days and informed that the holding deposit will be retained.
4. Changing the tenancy: This is capped at a £50 charge (or higher if the costs incurred are more) and can be made for something specific like adding another person to the AST – but only when requested by the tenant.
5. Early termination fees – Although these can be charged, no specific costs are outlined in the Tenancy Fees Act – but it should not be more than a “reasonable” amount and ONLY when requested by the tenant
6. Payments relating to utilities: It’s still legal to charge for any costs incurred by the landlord for broadband, TV licence, water, electricity, council tax etc
7. Replacing lost keys, fobs or security devices: These can incur ‘fair and reasonable’ charges but ONLY where they are required under the AST.
8. Default fee for rent arrears or late payment: Can only be charged at 3% (annually) above the Bank of England base rate – although it can be charged daily.
If a tenant (or a person acting on their behalf) is charged any other fee which is NOT on this list, it is now a prohibited payment by law – and CANNOT be charged.
All existing tenancies are legally binding according to their current terms and obligations.
However, after 31st May 2020 the new rules outlined above will apply to EVERY assured shorthold tenancy.
If as a landlord you currently hold a deposit amount which is more than 5 weeks’ rent on a current AST, you must refund the extra amount back to the tenant after 31st May 2020.
Can a landlord still increase the rent?
Yes a landlord can increase the rent, unless there is a specific clause in the AST stating that a landlord or agency cannot increase it during a fixed-term agreement.
If a fixed-term agreement does not exist, there are no rules limiting the amount the rent can be increased
If a landlord or letting agency breach the new legislation outlined above, they WILL be committing a civil offence – and could be fined up to £5,000.
If a further breach is committed within 5 years of a financial penalty being imposed (or a conviction for a previous breach), they will be charged with a criminal offence.
Under the Housing and Planning Act 2016, the penalty for committing a criminal offence like this is an unlimited fine.
However, under the new Tenancy Fees Act 2019, local authorities can now impose a fine of up to £30,000 – as an alternative to seeking a prosecution.
Should this happen, the authority will be granted the discretion whether to prosecute or impose a financial penalty.
If a financial penalty is imposed, it does NOT amount to a criminal conviction.
Should a landlord or letting agency fail to repay a tenant’s holding deposit, they’ll be subject to fines of up to £5,000 – and this will be classed as a civil offence.
If you’re a professional landlord who needs a bit of advice or support about the Tenancy Fees Act 2019, call 01482 564564 – our experienced residential property lettings management team can manage portfolios of any size.
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