It has been common practice in England and Wales for landlords and letting agents to charge tenants fees for different services. It has been well documented in the news, however, that some unscrupulous landlords have been charging well over the odds. As a result, new rules came into force on 1 June 2019, which will prevent landlords charging their tenants disproportionate fees.
Who will the new rules apply to?
The ban applies to England only. Separate rules come into force in Wales in September 2019.
The ban on tenancy fees will apply to:
- All assured shorthold tenancies (most tenancies from private landlords are ASTs)
- Tenancies of student accommodation
- Licences to occupy housing from private landlords
The ban will apply to all new tenancies that began on or after 1 June 2019.
Then, on 1 June 2020, the ban applies to all of the above type of tenancies. So, by June 2020, landlords with tenancies ongoing will need to make sure they comply with the new rules.
So, what does the ban cover?
The ban prohibits landlords charging tenants:
- for viewing properties
- tenancy set up fees (including fees for references, credit checks, inventories and fees relating to guarantors)
- check out fees
- third party costs (for example, cleaners, gardeners, or credit checking agencies)
Front-loading rent payments
It may seem tempting for a landlord to attempt to conceal fees by charging the tenant more in the first few months. However, the ban limits this. The amount of rent should usually be split equally across the first year of the tenancy. This is not to say that a landlord cannot increase or reduce the rent at a later date, however. A landlord can do this if agreed with the tenant, or if the tenancy agreement allows it.
The ban prohibits large rent deposits. Where the rent is under £50,000 a year, the deposit must not exceed five weeks’ rent. Where the rent is over £50,000 a year, a landlord can charge up to six weeks’ rent as a tenancy deposit.
A landlord / agent can take a deposit from a tenant to reserve a property while they undertake reference checks etc. A landlord may charge up to one week’s rent for this holding deposit. There are specific rules about returning holding deposits.
Some landlords and letting agents charge fees where the tenant defaults. For example, late payment fees, or for the replacement of lost keys. A landlord will only be allowed to charge a default fee if the tenancy agreement permits it and
The tenant is late paying their rent.
A default fee can be charged where the tenant is over 14 days late paying their rent. This fee must not be more than 3% above the Bank of England base rate for each day the rent has been outstanding. Anything more than this is prohibited.
The tenant has lost a key / fob / security device giving access to the property and requires a replacement.
If the landlord charges for a replacement key, they must provide written evidence that the fee is reasonable. Anything above this is prohibited.
Early termination fees
If a tenant wants to leave the tenancy before the end of the term, the landlord can charge a fee. However, the fee must not exceed the amount of financial loss suffered by the landlord due to the tenant leaving early. The landlord must be able to provide evidence of the specific losses they have incurred. For example, loss of rent re-advertising charges and letting agent fees.
Changes in tenancy agreement
Sometimes tenants will request a change to their tenancy agreement. For example, a change in housemate or permission to have a pet in the property. A landlord may charge for costs of amending the tenancy agreement up to £50. If the costs are higher, they must be reasonable.
As normal, tenants are responsible for paying council tax, utilities and internet bills at rental properties in accordance with the normal terms of their tenancy agreement.
What if the landlord charges prohibited fees?
There are various penalties for landlords who don’t comply. These include:
- Being forbidden from using the section 21 notice procedure to evict a tenant until any prohibited fees are repaid
- Tenants can issue proceedings to recover prohibited payments in the First-tier tribunal (property chamber)
- Financial penalty of up to £5,000. However, if the landlord breaches again within five years, this will be a criminal offence and an unlimited fine
- Landlords who persistently breach the ban risk being placed on a rogue landlord database.
Author: Ed Smith, Levi Solicitors
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Levi Solicitors directly.