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Date: April 3, 2019
Tenants will save £100’s when most letting fees are banned in June 2019

From 1st June 2019 new tenants in England will save hundreds of pounds in letting fees as a new law bans most of the fees charged by landlords and agents. Existing tenancies get the same protection a year later, 1st June 2020.

Key Points

  • Most letting fees will be banned
  • Tenants will save hundreds of pounds during a tenancy
  • A few letting fees can be charged but there are rules limiting when and how much can be charged
  • For new tenancies the ban starts 1st June 2019
  • For existing tenancies the ban starts 1st June 2020
  • The law applies to England
  • Tenants of e-lettings with any questions should contact the office on 0161 728 5001

Banned Fees

The new law, Tenant Fees Act 2019, bans most of the fees currently being charged by landlords and agents before and during a tenancy. Shelter and the Citizens Advice suggest that the law will create annual savings of over £150 million for tenancies in England. The savings each tenant makes during a tenancy could be hundreds of pounds.

Landlords or agents will no longer be able to charge for the following:

  • Credit checks
  • Inventories
  • Cleaning services
  • Referencing
  • 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
  • Charging for a guarantor form
  • Reminder letters

Allowable Fees

Some charges and fees can still be charged but there are now rules limiting how much. The following fees can still be charged:

  • Rent – landlords and agents cannot charge a higher first month’s rent to get around the fees ban.
  • Returnable Deposit – set at a maximum of 5 weeks rent where the annual rent is less than £50,000. Deductions may still be made for damage to the property.
  • Holding deposit – capped at one week’s rent.
  • Utilities and council tax – if included in the terms of the tenancy.
  • Tenant request for early finish of tenancy – only reasonable costs may be charged.
  • Changes to the tenancy requested by the tenant – capped at £50 if no proof of extra expense is provided.
  • Lost keys and late payment of rent – These must be “reasonable costs”, with evidence given in writing by the landlord or agent.

If a fee does not appear on the ‘Allowable Fees’ list above it is a banned fee and cannot be charged.

Do I still have to pay fees if I am an existing tenant?

Tenancies started before 1st June 2019 will get the same savings on banned fees from 1st June 2020. Until this time the landlord and agent may charge the fees laid out in the tenancy agreement.

What happens if a landlord or agent charges a banned fee?

When banned fees are taken, tenants will be able claim them back via the county court. Interest can be charged on banned fees from the day that the payment was made. Local Trading Standards are available to assist tenants and manage enforcement.

Landlords and agents can be fined up to £5,000 for a first offence. Increased levels of fines up to £30,000 and banning orders can be used for repeat offences.

How will this affect my tenancy with e-lettings?

E-lettings have always believed that charging tenants lots of fees made for unhappy tenants and shorter tenancies. The main fee we charged was an application fee and this was much lower then our competitors.

E-lettings is in the process of writing to existing tenants explaining the new law and altering our agreements for new tenancies.

If you are a tenant of e-lettings and have questions about the ban on letting fees then please contact us on 0161 728 5001.

Allowable Fees – the devils in the detail

Some aspects of the allowable fees need a bit more explanation…

Rent

Landlords or agents cannot charge tenants more at the start of the tenancy and the rent should be equally split across the term of the tenancy. If a tenant has to pay £700 in the first month and £500 per month for the rest of the tenancy, the extra £200 in the first month will be considered a banned fee.

In the first year of a tenancy a landlord or agent cannot reduce the level of rent to be paid unless they have agreed this with the tenant after the tenancy has begun or under a rent review clause in the tenancy agreement, which allows for both a rent increase or decrease. A tenant can agree with a landlord or agent that they will pay a different level of rent in the second and subsequent years of the tenancy.

Refundable deposit

A refundable deposit can be requested as security against any liabilities or damage caused by the tenants during a tenancy. A refundable deposit will be capped at no more than five weeks’ rent where the rent is below £50,000 a year.

Note that the new law does not affect the landlord’s or agent’s entitlement at the end of the tenancy to recover for unpaid rent and damage to the property by claiming a deduction from the deposit.

Holding deposits

An applicant can be asked or can offer to pay a holding deposit to show a commitment to rent a property whilst reference checks are completed. The new law states that a holding deposit cannot be more than one week’s rent.

A holding deposit must be refunded if the tenant signs a tenancy
agreement or if the landlord pulls out of the arrangement with the tenant
or fails to enter a tenancy agreement before the agreed deadline. The default deadline is 15 days after the holding deposit was received. However, the landlord or agent can agree, in writing, a deadline longer than 15 days with the applicant.

A landlord or agent can retain the holding deposit if the applicant fails a right to rent check, stops the application process or if the information provided by the tenant is false or misleading information.

Tenant’s request for early finish of tenancy

If tenants ask to leave before the end of their tenancy a landlord or agent is entitled to charge an early termination fee. The fee must not exceed the loss they have suffered in permitting the tenant to leave early. This would usually mean that they must not charge any more than the rent they would have received before the tenancy reaches its end.

A landlord or agent should aim to agree to any reasonable request to terminate the tenancy agreement early and should charge no more than to cover any likely void period. A tenant could still be required to pay rent at specified intervals as determined by their tenancy agreement until a replacement tenant is found.

Changes to the terms of the tenancy requested by the tenant

If a tenant requests changes in their tenancy terms (e.g. change of sharer) then for altering a tenancy agreement a landlord or agent can charge up to £50 if no proof of extra expense is provided.

If a landlord’s or agent’s costs are in excess of £50, then a higher fee can be charged but invoices and receipts must be provided.

Lost keys and late payment of rent

Landlords or agents may charge fees for the following under a term of the tenancy agreement:

  • Replacing a lost key or other security device to give access to the property. Only reasonable charges can be made and receipts and invoices should be provided.
  • Late payment of rent. After 14 days of non-payment of rent then interest can be charged on the outstanding amount. The rate of interest is capped at 3% above the Bank of England’s base rate for each day that the rent is unpaid.

The law is very particular about these fees and requires that both fees must be covered by dedicated terms in the tenancy agreement.

Summary

The new law in England bans most letting fees currently charged by landlords and agents. A few letting fees can still be charged but there are now rules as to when and how much can be charged.

Over the term of a typical tenancy, tenants are expected to make savings of hundreds of pounds.

For new tenancies the ban starts from 1st June 2019 and for tenancies started before that date the ban begins 1st June 2020.

If banned fees are charged then tenants can claim fees back through the County Court. Landlords and agents face fines for first offences of up to £5,000 and for repeated offences fines of up £30,000 and banning orders can be applied.

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