The Tenant Fees Act 2019: What it Means for Renters
On the 1st June 2019, The Tenant Fees Act was brought into effect in England, restricting the kinds of payments that landlords and letting agents can require from tenants.
Tenants renting a property in the private rented sector will now be protected from certain letting fees. The hope is that tenants will have more transparency when renting, being able to clearly see what the property will cost them in the advertised rent with no hidden costs.
What Payments Can Be Charged to Tenants?
Under the Act, effectively all payments in connection with a tenancy of housing in England is prohibited unless they are specifically permitted.
A cap will be put on the tenancy deposits that renters pay at the start of their tenancy at the equivalent of 5 week’s rent. It will no longer be legally expected for tenants to pay more than this (where the total annual rent is less than £50,000) to secure a property.
From the 1st June, the only payments permitted that landlords or letting agents can now charge for new contracts are:
- A refundable tenancy deposit – capped at five weeks rent when the total annual rent is less than £50,000, or six weeks rent for annual rent £50,000 or above
- A refundable holding deposit – to reserve a property, capped at no more than one week’s rent
- Payments associated with early termination of the tenancy – when requested by the tenant
- Payment in respect of utilities, communication services, TV license and council tax
- A default fee for late payment of rent
- Replacement of a lost key/security device giving access to housing – where required under a tenancy agreement
Landlords or a letting agent will be responsible for costs associated with setting up, renewing or ending a tenancy (e.g. referencing, administration, inventory, renewal, check-out fees etc).
If a tenant entered into a tenancy agreement before 1st June 2019, a landlord or letting agent will still be able to charge fees up until 31st May 2020 where these are required under the tenancy agreement. From 1st June 2020, the ban on fees will apply to all assured shorthold tenancies, tenancies of student accommodation and licenses to occupy housing in the private rented sector in England.
After this date, if a landlord asks a tenant to make an unnecessary payment, they must return the payment within 28 days.
How Much Will the Ban Save Renters?
Research has found that there are some 860,000 rental transactions a year across the UK, with the average tenant being charged £223 in fees alone. According to property app, Bunk, the numbers suggest that people living in England could expect to save £192 million a year as a result of the ban.
However, it has been suggested that landlords could increase the cost of rent in response to the ban to recoup their losses, particularly as letting agents are expected to increase the cost of commission to landlords. Both agents and landlords are expected to incur rising costs as a result of the ban, with letting agents expected to take a hit of around £157 million a year and landlords somewhere in the region of £83 million in the first year alone.
If a landlord or letting agent does not comply with the Act, they will be committing a civil offence and can be fined up to £5,000, and then up to £30,000 for a second offence.
The Act is certain to shake up the way landlords and letting agents do business across the country. Scotland introduced its own ban back in 2012, and its been pointed out that this only resulted in marginal rent increases, and that these increases were the same across all other urban areas of the UK; the market simply adapted to the change.
At Easylet & Sale, we know there will be many opinions from both landlords and tenants regarding the recent changes. If you have any questions or queries about the new Act, you can find a detailed guide on GOV.uk that explains everything you need to know as either a tenant or a landlord.