Tenant Fees Act for Property Portfolio Landlords

The guide on the upcoming Tenant Fees Act, containing information that landlords need to know about the upcoming legislation, looks at some of the key changes.

The new Tenant Fee Act hits Property Portfolio Landlords hardest

The National Landlords Association (NLA) is trying to help buy-to-let investors prepare for the ban on tenant fees by introducing a new comprehensive guide that tenants can download.

The Tenant Fees Act 2019, which will come into play from 1 June 2019, applies to England only, although similar legislation is being introduced in Wales.

The act means that from 1 June 2019, property landlords and agents will no longer be able to charge fees to set up or renew a tenancy in the private rented sector.

The Tenant Fees Act controls what payments a landlord or letting agent may ask for in connection with a tenancy of housing in England,and restricting what third-party contracts a tenant may be required to be bound by for services and insurance.

There will also be a cap on the amount of refundable security deposit a tenant would be required to pay to the value of five weeks’ rent as well as a cap on the amount of holding deposit a tenant will be required to put down to secure a property to the value of one week’s rent.

The new law will not just mean a ban on letting fees, but also the majority of other upfront fees payable by tenants to rent a property in England.

The only charges permitted will be for replacement of a lost key or security device, and a charge when rent payments are at least 14 days late.

Property landlords will also still be able to claim for damages where there is a breach of the tenancy agreement.

Tenancies to Which the Act Applies

The Act defines a tenancy (for the purposes of the Act) as:

  • student lettings (provided by a specified educational institution)
  • The Act also doesn’t apply to an assured tenancy (where no section 21 notice is ever available to the landlord)

The Act does not apply to contractual tenancies which would be used if the tenancy is for a company let or if it’s not to be the individuals only or principal home for example.

  • assured shorthold tenancies
  • licences (lodger lettings for example)

There will be a 12-month transition period for existing tenancies, which means that any tenancies agreed before 1st June 2019 will not be subject to the new rules until 2020.

However, all new tenancies from 1st June 2019 will need to comply with the regulations. You must make sure that any tenancy agreements are up-to-date and reflect the provisions around fees. NLA members can always access the most recent version of our Assured Shorthold Tenancy agreement via NLA Forms.

What fees are banned?

Anything not permitted, that the tenant (or someone acting on their behalf like a guarantor or parent) is required to pay as a condition of the ‘grant, continuance, assignment, termination or renewal’ of an assured shorthold tenancy or licence agreement.

This includes payments to third parties, either for services throughout the tenancy or for specific performance of a loans and jobs from third parties.

In short this means that pretty much any fee that is in the tenancy agreement will be void unless it is exempt.

Some examples of banned fees then would be:

  • Charging for a guarantor form
  • Professional cleaning
  • Having the property de-flead as a condition of allowing pets in the property
  • Admin charges
  • Requirements to have specific insurance providers
  • Gardening services
  • Credit checks
  • Inventories
  • Cleaning services
  • Referencing

What is exempted from the banned list?

Rent, Holding deposits, charges and deposits  for defaulting on the contract are all exempted from this ban.

However, all 4 are subject to additional restrictions as part of the legislation and landlords and agents will need to be mindful of these changes.

In addition, a landlord can require the tenant to use a specific utility or communications provider. most required payments to third parties are prohibited. Agents are not allowed to require this however.

Landlords may charge for changing tenants or allowing tenants to vacate the property early. This is subject to restrictions on costs however.

For property landlords who are found to be in breach of the fee ban, a fine of £5,000 will be issued for an initial breach of the ban. It will be a criminal offence if an individual has been fined or convicted of the same offence within the last 5 years.

Alternatively, financial penalties of up to £30,000 can be issued by local authorities instead of prosecution.

For advice on how landlords should prepare for the ban on fees click here to download the guide.