Landlord Letting Fees to be Banned in England
The Tenant Fees Bill, expected to become law soon, will make it unlawful for landlords (and letting agents) in England to charge tenants a wide range of 'admin' fees. At the moment tenants can be charged a range of fees, typically amounting to between £250 and £350 (according to Citizens Advice). The Tenant Fees Bill means that landlords will no longer be able to charge tenants fees for discrete admin activities such as: renewing a tenancy, credit checks or referencing.
Letting fees are already banned in Scotland.
Under the new legislation landlords will still be able to charge tenants:
- rent (of course!)
- a (refundable) security deposit
- a (refundable) holding deposit to reserve the property
- reasonable costs (£50 max) for changes to the tenancy requested by the tenant
- reasonable costs for defaults by the tenant such as late payment of rent (at least 2 weeks late) or replacement keys ('default fees')
- council tax
- television licence
- telecoms fees e.g. landline telephone, internet, cable or satellite tv.
Landlords who charge any other fees could face a £5k fine.
The ban on letting fees will apply for tenancies signed from 1 June 2019. This will apply to both new tenancies and tenancy agreements signed to renew an existing tenancy.
Cap on Deposits
The Bill will also introduce a cap on security deposits, capped at the equivalent of 5 weeks' rent for properties where the annual rent is no more than £50k, and 6 weeks' rent for properties with higher rent. Of course, landlords are still at liberty to charge less than maximum amount.
A refundable deposit to reserve the property will be capped at one weeks' rent. Landlords can also only take one holding deposit for a property at a time. The first tenant's deposit must be refunded before a second holding deposit can be taken, unless the landlord is allowed to keep the deposit e.g. the tenant gave false information or declined to take up the tenancy when offered. If the landlord has a right to retain the deposit but the tenancy is still entered into then the holding deposit must still be returned to the tenant.
The Bill introduces a requirement for landlords to formally notify a potential tenant, in writing, if they are retaining the holding payment. The notification must explain why the deposit is not being refunded and must be given within seven days of the landlord deciding not to enter into the tenancy agreement.
Changes to Tenancy Agreements
The most obvious effect of the Tenant Fees Bill (TFB) is that landlords will not be allowed to charge tenants and prospective tenants a range of up-front fees. Of course, this means that landlords may be inclined to increase rent to cover any costs incurred when setting up a tenancy. While landlords are free to charge whatever rent they like (within the bounds of existing rules and controls), landlords may not charge variable rent to recover fees (see Schedule 1 of The Bill).
Landlords should review their tenancy agreement template and ensure that any charges set out within the agreement are allowed under the Tenant Fees Bill and are charged at an acceptable rate (many fees are capped at £50 or "reasonable costs").