TENANT FEE ACT

TENANT FEES BAN IN ENGLAND

Introduction

The government continues to move forward with a planned ban on fees charged by letting agents and landlords to their tenants. While this is yet to come into force, and draft legislation is always subject to change, it is very likely to come into force in much the same format so landlords and agents should start considering the impact on their business now.

This guide will act as a primer for landlords and agents to help them prepare for these upcoming changes.

This guidance is based on legislation that has not yet come into force. Landlords and agents should be aware that it remains subject to change.

Does the fee ban apply to agents and landlords?

Yes, it will apply to both agents and landlords.

Will the fees ban apply to older tenancies?

Not immediately. It will apply to renewals of tenancies, excluding statutory and contractual periodic tenancies that arise after the Tenant Fees Act comes into force.

After one year the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective. If a landlord or agent takes a prohibited payment after that date they will have 28 days to return it or be considered in breach of this legislation.

What fees are banned?

Anything not exempted, 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 job and loans 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.

Examples of banned fees then would be:

What is exempted from the banned list?

Holding deposits, rent, deposits and charges 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, most required payments to third parties are prohibited, however a landlord can require the tenant to use a specific utility or communications provider. Agents are not allowed to require this however.

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

Changes to the tenancy

While most costs related to assignment or surrender of a tenancy are prohibited, landlords and agents are still allowed to charge certain small sums to tenants if the tenant requests a change in tenant or an early surrender.

Where the tenants have requested a change in the tenancy (such as swapping tenants), the landlord may charge a fee of £50 for the change or the costs incurred. They must be able to evidence in writing any costs incurred if they do go above £50 and the draft guidance makes it clear that £50 is considered the norm for landlords and agents.

Where the tenants have requested early surrender of the tenancy, the landlord or agent may charge fees equivalent to the loss incurred. As charges such as referencing, tenancy drafting, etc are prohibited landlords will not be able to show a loss has been incurred for the provision of these services. Instead, landlords and agents will be able to charge the equivalent of the rent lost due to the unforeseen void period. As the void period may not be clear at the point of charging many landlords and agents will likely start to regularly refuse tenants looking to surrender early as a result.