The Tenant Fees Act 2019

With the average house price sitting around £125,397, in the North East, it is no surprise that the market has created a generation of renters.  Insufficient levels of home building has succeeded in driving up the price of a first time home to something not easily achieved by a first time buyer.  As a result the demand for rental properties is high meaning landlords and agents wield the power whilst tenants are left vulnerable to the unscrupulous practices of a small minority within the industry.

This is perfectly illustrated by letting fees.  Citizens Advice have released figures stating that those privately renting in England have paid a collective sum of £13m a month in letting fees.  These fees are often claimed as admin charges for viewings, references, credit checks and other fees creating a wholly disproportionate charge.

In order to combat such practices the Government has taken action and introduced the Tenant Fees Act.  This Act follows the successful introduction of similar laws in Scotland.  The new Act applies to any new or renewed tenancy agreement signed on or after 01 June 2019 banning most letting fees and capping tenancy deposits for those tenants in the private rented sector of England.  These measures aim to preclude hidden charges and prevent tenants being faced with high upfront costs that are a struggle to afford.

Permitted payments under the Tenant Fees Act

Upfront fees will not be removed altogether, there will still be certain payments permitted under the new Act.  From 01 June 2019 the only items landlords and letting agents can charge to tenants of new contracts are outlined below;

1. Rent
2. A landlord will still be able to gain security if there should be damage to the property by charging a refundable deposit. However the deposit will be subject to a maximum limit.  If the total annual rent is less than £50,000 then the deposit will be capped at a maximum of five weeks rent.  If the annual rent is over £50,000 the maximum a tenant can be charged is six weeks rent.
3. Refundable holding deposits to reserve a property can be no more than one weeks rent.
4. Reasonable requests to alter a tenancy arrangement can be subject to a charge.
5. The charge for early termination of the tenancy as requested by the tenant must not exceed the loss of the landlord due to loss of rent and the cost of advertising.
6. Utility bills are excluded from the ban however the landlord must not overcharge the tenant if these are paid separately from the rent.
7. Default fees for late payment and/or key replacement must not be more than 3% above the Bank of England’s base rate for each day the payment is outstanding.

Will all of this result in higher rents?  Although tenants will benefit not having to pay high upfront costs this could be negated if landlords increase rents.  Letting agents who lose a significant portion of their profits could decide to charge landlords more for their service, again pushing up rents.  However according to Shelter 59% of letting managers have said the ban, already in force in Scotland, has had no impact on their business.  This suggests that the substantial benefits of the Act will be enjoyed by tenants with any adverse impacts taking time to emerge.

Contact

If you are a tenant or a landlord who needs advice about your rights contact our property team to find out more.