Ban on Tenant’s Fees

The Tenant Fees Act came into force on 1st June 2019 with the aim to increase transparency in the rental market.

The new rules apply to all Assured Shorthold Tenancies (ASTs), including student lets and properties let on license, signed after 1 June 2019.

The Act explicitly states the payments can then be charged in connection with a tenancy and include the following:

  • Rent and the cost of utilities;
  • A tenancy deposit (restricted to no more than 5 weeks’ rent);
  • A holding deposit (capped at one weeks’ rent);
  • A fee for changing the tenancy agreement (if instigated by the tenant only);
  • A fee for early termination of the tenancy agreement (if instigated by the tenant only);
  • A fee for late payment or lost keys.

Payments for damage are also allowed on the basis these are a breach of the tenancy agreement. But the new rules are designed to ensure landlords cannot present exaggerated bills to tenants.

Any other payments requested by a landlord from a tenant are now treated as ‘prohibited’ payments, including administrative fees, credit check fees, and tenancy renewal fees. Provisions requiring the tenant to arrange a professional clean at the end of the tenancy or to hire a gardener have also been outlawed.

The removal of these ‘hidden’ payments and fees are estimated by the Treasury to save tenants across England £240m a year, or £70 per household.

Those landlords that do not apply the new rules face fines of £5,000, increasing to £30,000, or even a criminal record.

Are these changes a positive move for the industry?

At a headline level, these new rules are expected to be initially welcomed by tenants but will be seen as another blow for landlords in the private rented sector.

However, the work undertaken by the property agent is now expected to be charged as a fee to the landlord and then covered by an increase in the amount of rent. The new Act prohibits rental hikes in an initial period to cover the fees associated with a new tenancy, but not for an increase in the rent for the duration of a tenancy agreement. Agents are expected to reassess the market following these rules and may well recommend that landlords increase their rents to cover some, or all, of this additional charge.

Similar rules for Wales are expected to come into effect on 1st September, and a ban on letting fees has been enforced in Scotland since 2012.

This article featured in issue 13 of our MHA Construction and Real Estate newsletter series.

Real Estate Matters Issue 13

If you have any questions regarding Tenants Fees, get in touch with a member of our real estate team on 01903 234094.