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Letting fees ban set to save tenants an average of £400 per year.

Estate agents and landlords will be banned from charging tenant/letting fees in respect of residential tenancies which commence on or after 1 June 2019 in England.

 

The newly enacted Tenant Fees Act 2019 (‘the Act’) was proposed by Chancellor Philip Hammond in his 2016 Autumn Statement in an attempt to prevent landlords and agents profiting and exploiting private renters who have little choice but to pay such fees. The Act is said to bring average savings of around £400 per tenancy.

 

Landlords and estate agents should take note as, if they breach the new legislation, they could be fined £5,000 for an initial breach with a criminal offence where a person has been fined or convicted of the same offence within the previous 5 years. Penalties up to £30,000 can be issued as an alternative to prosecution.

 

What does the Act apply to?

The ban applies to tenancies which are:

  • Assured Shorthold Tenancies (other than a tenancy of social housing or a tenancy which is a long lease);
  • Lettings to students (subject to certain conditions); or
  • A Licence to occupy housing.

 

What cannot be charged?

Fees for the following are banned:

  • References.
  • Credit checks.
  • Charging for a guarantor form.
  • Administrative charges.
  • Cleaning services
  • Gardening services
  • Charging for a guarantor form.

Trading Standards will be responsible for enforcing the bans.

 

What can still be charged?

Tenants can still be charged for:

  • Rent.
  • Utilities, communication services and Council Tax.
  • Security deposit (Note: the new legislation has capped deposits at 5 weeks’ rent unless the annual rent exceeds £50,000, in which case deposits are capped at 6 weeks’ rent).
  • Holding deposit will be capped at no more than one week’s rent.
  • The amount charged for a change to tenancy will be capped at £50 unless the landlord can demonstrate that greater reasonable costs were incurred.
  • A change or early termination of the tenancy requested by the tenant.
  • Payment of damages where the tenant has breached terms in their tenancy agreement.
  • Payments arising from a default by the tenant (i.e. fines for late rent payments, replacement of keys).

 

Other consequences

The Act will prevent landlords from recovering possession of their property via a Section 21 (eviction) Notice until they have repaid any unlawful charged fees.

 

Whilst the fees ban will be very much welcomed by tenants, it will not be very welcomed by agents or landlords as the cost of letting properties may increase. The reality is that this may lead to tenants being charged in other ways, such as by way of an increase in rent, so that landlords can recover any monies paid towards the cost of conducting routine credit checks, references and also for the preparation of the tenancy agreement.

 

If you have any further queries regarding the letting fees ban, please contact our property team on 0207 636 2100.

 

Web site content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

 

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