After much debate, it has been confirmed that the Tenant Fees Bill has passed its final hurdle in Parliament and is due to be implemented as the Tenant Fees Act 2019 with effect from 1 June 2019.
The Bill is intended to reduce costs for tenants renting in the private sector by improving fairness, competition and affordability.
But what are the implications for businesses operating in the private rental sector and what preparations need to be undertaken for a post-tenant fees era?
For Landlords and Agents their ability to charge tenants fees will be more heavily restricted.
Administration costs will all but be abolished with no ability to charge for the creation or renewal of a tenancy agreement, inventories, credit checks, guarantor forms, referencing and cleaning or garden services. The only administration fees permitted will be limited to those associated with a change or early termination of a tenancy when requested by the tenant or in relation to utilities, services and Council Tax.
Payments arising from a default by the tenant can be recovered but only in limited circumstances, such as replacement keys. The right to charge interest on late rent payments remains but holding deposits will be capped at no more than one week’s rent per property and security deposits capped at a maximum of five weeks rent.
With implementation of the provisions due to come into force in less than 4 months’ time, those in the industry will need to act swiftly to ensure that their standard agreements, terms and conditions are all up-to-date. Any failure to comply can lead to a civil offence with a fine of £5,000 for a first offence and civil penalties of up to £30,000 for subsequent breaches.
Additionally, careful consideration should also be given to any existing agreements currently in place. Whilst the ban on fees will initially only apply to tenancy renewals and new tenancies that arise after 1 June, the fees ban will be applicable to all pre-existing tenancies from June 2020 including those turned statutory periodic. After which, any clauses in the agreement that previously permitted the outlawed charges, will become ineffective.
The wider implication of this is that any Landlord or Agent who makes a charge that relates to a banned fee will render a Section 21 Notice defective and Landlords will lose their right to a mandatory no fault right to possession unless that fee is returned to the tenant within 28 days.
It’s therefore worth spending some time reviewing existing tenancy agreements and templates to ensure that these will remain fit for purpose after 1 June 2019.
Whilst these restrictions may cause concern for those operating in the sector, Agents who offer good value and high-quality services to Landlords, and Landlords who charge reasonable fees, will continue to be in demand and play a vital role within the sector to ensure housing for all.