On the eve of the Tenant Fees Act becoming law tomorrow on June 1, Mortgage Strategy has put together a final checklist of everything you and your landlord clients need to know.
It has been a controversial policy change, with landlord groups arguing costs must rise for tenants in order to cover the additional expenses of managing and letting their properties.
Lettings agent trade body Arla Propertymark says landlords are already being driven out of the market, as it reported a spike in the number of investors selling their buy-to-let properties in new research yesterday.
But on the other side of the debate, housing charities like Shelter believe the changes are much needed and will lead to improvements in the rental sector.
Campaigns director Greg Beales says: “The new Tenant Fees Act becoming law – which bans all upfront fees to tenants – is a landmark moment for millions of renters across the country, who will no longer have to fork out hundreds of pounds for random, arbitrary fees every time they move or renew a tenancy.
“With many hard-pressed tenants already facing eye-watering rents, this Act will help keep valuable pounds in their pockets, giving important protections and more peace of mind.”
Here is a final checklist of all the important facts you need at your fingertips:
All tenant fees will be banned apart from the following exceptions:
From tomorrow it will be illegal for letting agents to charge fees to tenants unless they are covered by a small number of exemptions which are called “permitted payments”.
There are strict rules governing how much can be charged for some of these permitted payments, which are explained in more detail further on in our guide.
- Rent, council tax, gas, electricity and other utilities bills
- Security deposits
- Holding deposits
- Late payment fees
- Fees for changing a tenant or ending a tenancy early
But agents and landlords can no longer charge fees for any other aspect of the tenancy including the following:
- Administrative fees
- Charges for carrying out reference checks
- Fees for check-ins, check-outs, inventories or ending tenancies within the agreed timeframe of the contract
- Renewal fees for extending a tenancy
How much can be charged for deposits and other permitted payments?
- For holding deposits, a maximum of one week’s rent can be charged. This can be retained by the landlord or agent if the tenant withdraws from the tenancy, fails any of the Right to Rent immigration checks now required, or if the tenant does not sign and return their rental agreement within 15 calendar days or by the date agreed.
- For a security deposit, a maximum of five weeks rent can be charged if the annual rent is under £50,000 a year or six weeks if the rent is higher than this.
- The security deposits cover damage during the tenancy and any missed or late payments.
- If a tenant falls behind with rent by more than 14 days, the landlord can charge interest at the Bank of England base rate plus 0.75 per cent.
- If a tenant loses their keys the landlord can charge the cost of replacement only.
Landlords can still charge for the following contract changes, but only if they are requested by the tenant:
- A maximum of £50 including VAT to agree and change any of the wording in the legal contract terms
- Max of £50 to change the names of any of the tenants on the contract, for example when one house mate leaves the property.
- If a tenant wishes to end a tenancy before the contractual date, they will be liable for the landlord’s costs in re-letting the property and will have to pay any outstanding rent until the replacement tenancy begins.
What rules apply to tenancies which were agreed before June 1?
Landlords and agents can charge previously agreed fees to tenants whose contracts started before June 1, but only up until 31 May 2020 when these will also be banned.
All tenancy agreements that are renewed on or after June 1 will have to abide by the new rules and restrictions on charges.
In cases where a tenant was charged a check-out fee upfront for a tenancy which ends after June 1, this must be refunded.
For tenancies where the fixed contract period has come to an end, but where they continue beyond June 1 without a new agreement being signed (sometimes known as periodic tenancies), landlords and agents can levy fees as previously agreed up until 31 May 2020.