Changes to Tenant Fees – What Will Happen on 1st June?

Both ourselves and Landlord News have been discussing the topic of the Tenant Fees Bill since its early stages, updating our readers as and when fresh information and comments have been announced. It is has been highlighted exactly why the ban, due to become the Tenant Fees Act 2019 on 1^st June, is being introduced, and now we want to discuss who it will affect and in which ways…

Who will be affected by the Tenant Fees Ban?

Landlords

In Chapter 4 of the Tenant Fees Act 2019 it states that, in relation to this enforcement, a ‘landlord’ refers to:

• Anyone who proposes to be a landlord under a tenancy
• Anyone who has ceased to be a landlord under a tenancy
• A licensor under a licence to occupy housing
• Those who propose to be a licensor under a licence to occupy housing
• Those who have ceased to be a licensor under a licence to occupy housing

It is also worth noting that the use of the word ‘tenancy’ refers to:

• An assured shorthold tenancy (excluding any of social housing or those that are long lease)
• A student let that meets the conditions set out in paragraph 8 of Schedule 1 of the Housing Act 1988
• A licence to occupy housing

For further explanation, it also highlights ‘licence to occupy housing’ to include “a licence granted to a licensee by a licensor who resides in the housing unless it is an excluded licence”. This does not include social housing or holiday lets.

Tenants

The tenants the Act will apply to are defined to include:

• Those who propose to be a tenant under a tenancy
• Those who have ceased to be a tenant under a tenancy
• A licensee under a licence to occupy housing
• Anyone who proposes to be a licensee under a licence to occupy housing
• Anyone who has ceased to be a licensee under a licence to occupy housing

Letting agents

For clarification, the Government has defined the term ‘letting agent’ to mean a person who engages in letting agency work.

‘Letting agency work’ refers to the jobs done by someone employed by a letting agency in response to instructions received from a landlord looking for tenants, or a tenant looking for a house to rent.

What will be classified as a permitted payment?

Landlords and letting agents will no longer be able to request tenants to make prohibited payments. It has been detailed in the wording of the Act that a prohibited payment is anything that is not listed as a permitted payment, which includes:

• Rent

However, landlords and letting agents are not allowed to charge one amount for the first period and then lower it for later periods. Some may have been considering this as a way of making back the costs that previously fell on the tenants, but don’t get caught out!

• Tenancy deposits

This will now be capped at five weeks’ rent for lets where the tenant is paying less than £50,000 per 12-month period. If rent payments total over £50,000 in a 12-month period then a deposit of up to six weeks’ rent may be requested.

• Holding deposits

No more than one week’s rent can be legally taken as a holding deposit. You may wish to take a look at our guide on how to calculate one week’s rent.

• Default fees

These may be charged in the case of your tenant losing a key or other security device that gives access to the property, or if they fail to make a rent payment within 14 days of its due date. Default fees must not exceed costs reasonably incurred by the letting agent as a result of the default. Such fees must also be supported by written evidence.

• Payment on variation, assignment or novation of a tenancy

These payments are permitted as long as they are at the tenant’s request. However, the amount must not exceed £50 or the reasonable costs of the landlord.

• Other payments

Council tax, a television licence, electricity, gas or other fuel, water or sewerage and communication services (which include phones, internet, cable television and satellite television) are all permitted payments. Again, the amount must not exceed the reasonable costs incurred by the landlord for or in connection with the provision of the service.

What else will be prohibited?

As well as certain payments, specific arrangements will also be prohibited. Landlords and letting agents will not be allowed to require a tenant to enter a contract for the provision of a service or for insurance. They also cannot require a tenant to make a loan to any person in connection with a tenancy of housing in England.

Treatment of holding deposits

Schedule 2 of the Tenant Fees Act 2019 states the requirements for the repaying of a holding deposit, for example:

• If a tenancy agreement successfully goes ahead, the holding deposit must be repaid once the tenancy has begun, within seven days beginning with the date of the tenancy agreement, unless it was made towards the first rent payment or the tenancy deposit.
• If the landlord decides against entering into a tenancy agreement before the deadline, which is the fifteenth day beginning when the landlord or letting agent received the holding deposit, it must be returned within seven days beginning the date on which the landlord makes this decision
• If the landlord and tenant fail to enter into a tenancy agreement before the deadline, the holding deposit must be returned. This should be within seven days beginning with the deadline for the agreement

There are some circumstances in which a landlord or letting agent might be able to keep the holding deposit, for example:

• They are prohibited by section 22 of the Immigration Act 2014 from granting the tenancy, and did not know or could not reasonably have been expected to know, prior to taking the holding deposit
• The tenant has provided them with false or misleading information
• The tenant decides not to enter into a tenancy agreement

What will be the consequences of non-compliance?

There will be financial penalties for landlords and letting agents who do not comply with the changes to tenant fees. The local enforcement authority for those who are non-compliant will serve a notice of intent, stating the amount they propose the fine to be and for what reason(s). The accused landlord or letting agent will be allowed to make written representations to the authority about the proposed penalty.

After 28 days from when the notice of intent was served, if it has been decided that the penalty will be imposed, the enforcement authority will confirm the exact amount to be charged and serve a final notice imposing that penalty.

For a first offence, the penalty could be up to £5,000. If a second offence is committed by the same person within five years, they may receive a penalty of up to £30,000.

You can read in full the details of the Tenant Fees Act 2019 legislation by visiting legislation.gov.uk.

Disclaimer: The opinions and views expressed in the above article are those of the author only and are for guidance purposes only. The author disclaims any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.