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19 June 2019

I have a small portfolio of rental properties. Will I be affected by the recent ban on tenant fees?

This article was first published by City AM, Tuesday 18 June 2019.

The short answer is that if you are renting out properties in England under an assured shorthold tenancy, students let or licence, you are going to be affected by the recent ban on tenant fees. It is now unlawful for you or your letting agent to charge any fees other than those which are prescribed by the law.

The Tenant Fees Act 2019 which came into force on 1 June 2019 means that landlords and letting agents are no longer able to charge fees to set up or renew a tenancy for homes in the private rented sector in England. This means that landlords will be responsible for the costs of setting up, renewing or ending a tenancy and will not be able to charge tenants for references, immigration and credit checks, guarantor forms, inventory, cleaning and administration costs, or renewal and check-out fees.

In addition, security deposits are capped at five weeks’ rent for tenancies where the annual rent is less than £50,000 a year, or 6 weeks’ rent where the total annual rent is £50,000 or above. A refundable holding deposit (to reserve a property) is capped at no more than 1 week’s rent.

The ban on tenant fees applies to new or renewed tenancy agreements signed on or after 1 June 2019. For tenancies entered into before 1 June 2019, landlords and letting agents will still be able to charge fees until 31 May 2020, but only where these are payable under an existing tenancy agreement. Fees that have been charged to a tenant before 1 June 2019 do not have to be paid back.

A tenant cannot be evicted using the section 21 procedure until the landlord has repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.

Sanctions that may be imposed on landlords or letting agents for breaching the Act range from a fine of up to £5,000 for a first offence, to a criminal conviction and an unlimited fine for subsequent breaches, and possible inclusion on the Database of Rogue Landlords and Property Agents.

The fees ban was introduced to improve affordability and eliminate the upfront fees which could prove prohibitive to those on low incomes or with little disposable cash, and to improve transparency so that tenants know what they are paying for, and to prevent agents from double charging both tenants and landlords for the same service.

The long-term impact of the ban on letting fees will not be known for some time, but from a landlord’s perspective it could ultimately improve the rental market as a whole if more people are encouraged to rent in the future as a result of the ban.

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