You may already be aware that from 1st June 2019, the Government are introducing a ban on tenant fees for rental properties. The only permitted payments a prospective tenant will be required to make are; –
If pets are allowed, we must advertise the property with two different rental figures – one without pets and a different amount if pets are permitted. We are recommending this is an extra £10 per month per pet. We are no longer permitted to ask for additional deposit for pets
A refundable tenancy deposit
Deposits will be limited to 5 weeks rent as a maximum amount for tenancies where the annual rent is below £50,000.
Deposits for tenancies where the annual rent is £50,000 or more are limited to the equivalent of 6 weeks rent.
A refundable holding deposit
We will be requesting a holding deposit, equivalent to 1 week’s rent and subject to statutory legislation on the repayment of this should the tenancy not go ahead. Briefly, this is proposed to be:
- The landlord has 15 days to make a decision on the tenancy once a holding deposit is taken.
- If the tenancy does not go ahead then the money must be repaid in full within 7 days of the deadline being reached or the landlord backing out.
- Repayment does not need to be in full if the tenant backs out of the tenancy agreement themselves, fails right to rent checks, has provided false or misleading information, or where the landlord tries their best to get the information needed but the tenant fails to provide it within the 15 days.
- If the tenancy does go ahead, the holding deposit must be returned within 7 days of agreement, unless it is converted into part payment of the actual deposit or used towards the initial rent payment. For accounting purposes, we will use the holding deposit against the initial rent payment.
Payments to change to the tenancy
While most costs related to assignment or surrender of a tenancy are prohibited, landlords and agents are still allowed to charge certain small sums to tenants if the tenant requests a change in tenant or an early surrender.
Where the tenants have requested a change in the tenancy (such as swapping tenants), we may charge a fee of £50 for the change or the costs incurred. We must be able to evidence in writing any costs incurred if they do go above £50.
Payments associated with early termination of the tenancy
Where the tenants have requested early surrender of the tenancy, we may charge fees equivalent to the loss incurred. As charges such as referencing, tenancy drafting, etc are prohibited, landlords will not be able to show a loss has been incurred for the provision of these services. Instead, landlords and agents will be able to charge the equivalent of the rent lost due to the unforeseen void period. As the void period may not be clear at the point of charging many landlords and agents will likely start to regularly refuse tenants looking to surrender early as a result.
Payment in respect of utilities, communication services, TV licence and council tax
Tenants are still responsible for paying bills in accordance with the tenancy agreement, which could include council tax, utility payments (gas, electricity, water) and communication services (broadband, TV and phone)
Summary of banned fees;
- Charging for a guarantor form
- Credit checks
- Cleaning services
- 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
- Any damage caused by the tenant to the property during the tenancy cannot be charged to the tenant – it must be deducted from the deposit
Breaches of the tenancy agreement (damages)
Where the tenant has breached their tenancy agreement and caused damage as a result, then landlords may still seek compensation via deductions from the deposit or court action.
Breaches of the tenancy agreement (default payments)
Previously it was expected that agents would be able to charge for sending reminder letters. The latest draft of the legislation has tightened up the rules on default payments significantly however.
Under the current draft of the legislation, agents are allowed to charge for two types of default payments – loss of keys and late payment of rent. Both are subject to restrictions.
For the loss of keys, agents are allowed to charge the reasonable cost that they can evidence in writing. Anything agents cannot evidence in writing with receipts will likely be considered a prohibited payment.
For late payment of rent, landlords and agents may only charge 3% above the Bank of England base rate in interest on the late payment of rent from the date the payment is missed. At the time of writing this would be 3.75% interest. They may not charge for sending reminder letters.
Will the fees ban apply to older tenancies?
Not immediately. It will apply to renewals of tenancies, excluding statutory and contractual periodic tenancies that arise after the Tenant Fees Act comes into force i.e. June 1st 2019
After one year the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective. If a landlord or agent takes a prohibited payment after that date they will have 28 days to return it or be considered in breach of this legislation.
In order to keep things simple, Gascoines are now encouraging all tenants to go onto a periodic contract once their tenancy is due for renewal (after 1st June 2020), otherwise we must refund any deposit over the maximum 5 weeks rent. To clarify, the terms of the original agreement will remain in effect, but the notice period changes. It remains at two months for the landlord to the tenant, but only one month for the tenant to the landlord – both notices can be served at any time during the month and not on the rent day of the tenancy.
In view of the new legislation, Gascoines Property Management are recommending that all our landlords consider taking out Rent Protection and Legal Cover which will provide peace of mind. We have arranged through Alan Boswell Insurance, a comprehensive scheme for all our landlords whether new or existing. Please contact the rentals team for further information.