Ban Letting Fees Guide

The Tenant Fees Act (2019) cAme into force for properties rented in England on 1st June 2019. and WALES 1st SEPTEMBER 2019

A landlord [or Agent] must not require a relevant person [Tenant/Guarantor] to make a prohibited payment to the landlord [Agent] in connection with a tenancy of housing.

Permitted payments are clearly defined in respect of - Rent, Tenancy Deposits, Holding Deposit Fees, provision of utilities, Coms, TV Licence etc ANY OTHER payment requested is not permitted and likely to be deemed a breach of the Act and expose one to criminal penalties, banning orders and fines up to £30,000 [Penalties will vary in Wales]

A sledge hammer to crack a nut is a polite way to describe this punitive legislation

Deposits New Law

As from 1st June 2019 Tenancy deposit restricted to no more than five weeks’ rent. ONLY if the annual rent is above £50K per an annum may the deposit be up to 6 weeks -but no greater

Warning upon the renewal of a Tenancy

If the landlord has a deposit exceeding the permissible limits then issues a new/ renewal Tenancy agreement such excess monies MUST be returned within 28 days. - or used against the rent account ONLY with the consent of the Tenant [the issue here is that a renewal tenancy agreement becomes new tenancy agreement]. Continuation as a periodic tenancy after the implementation of legislation has a 12 month grace to remedy [but Guidance states

• Q. If a tenant paid a tenancy deposit which exceeds the cap before the ban in 2019, do I need to re-pay the amount of the deposit above the cap?
• No. Landlords and letting agents are not obliged to immediately refund part of a tenancy deposit that is above the cap but was paid before the change in law. If a tenant signed a tenancy agreement before law date (and that tenancy is continuing or is a statutory periodic agreement) then the tenant will be bound by the terms of that contract until it is either renewed or terminated.
  

A Landlord or a Letting Agent may still charge the Tenant renewal fees for the new contract

• RENEWAL FEES PAYABLE However, if the tenancy was entered into before 1 June 2019 and it was agreed in their contract to pay certain renewal fees, then a landlord or agent can charge these fees for a new fixed-term agreement or statutory periodic agreement up until 31 May 2020. [see Ban Letting Fees Renewals and guidance implies a Tenant may still be charged fees upto 31 May 2020 ]

HOLDING DEPOSIT, NO MORE THAN ONE WEEKS RENT- see PIMS GUIDE TO HOLDING FEES

A landlord or Agent MAY only take one holding fee per a property - They may not take another holding fee in respect of the same property until such other Holding deposit returned [unless lawful reason not to return]

Strict 15-day compliance – within fifteen days of holding deposit deemed received you return– you MUST comply or commit an offence, UNLESS agreed with the tenant in writing [consent] a different date be the deadline for agreement for the purpose of this law. – Example add clauses to Holding Deposit Form - sample for new law click here

• PIMS TIP - the 15 days compliance means you cannot to take another holding deposit for the same property - it will be wiser to qualify bad tenants out faster -to eliminate undesirable tenants ASAP use your free PIMS credit checks - you can see a person's credit file instantly, if it is poor decline them ASAP and move on to next prospect [Credit Checks Members run a credit check, Non-members click here]

I the tenant agree my Landlord may use may deduct my Holding Deposit from my first month’s rent payable / Deposit. Such monies shall be credited to my rent account upon commencement of tenure the proposed date being Y –

To assist we have already drafted the New Holding Deposit Form click here to download

Rent payments - New Laws

Rent – These laws are watertight one cannot charge more rent months say 1,2,3 then reduce the rent to a lower figure – this would be circumnavigating the laws [unlawful] and expose you to a fine. [see law page 28 SCHEDULE 1 Section 3 PERMITTED PAYMENTS]. So, rent may not vary until after 12 months after commencement of tenure unless rent increase clause permits or variation agreed with the tenant in writing

Ending a tenancy early - ONLY at the Tenants request

A payment is a permitted payment if it is a payment to a landlord or Letting Agent in consideration of the early termination of a tenancy at the tenant’s request— But if the amount of the payment exceeds the loss suffered by the landlord/Agent as a result of the termination of the tenancy, the amount of the excess is a prohibited payment.

Permitted charges

You cannot require a person purchase insurance or a service unless it is a utility to the tenant, or the provision of a communication service to the tenant. – that is included in the tenancy agreement but such at cost and no profit mark-up otherwise unlawful

HOW TO USE RENT INCREASES TO BYPASS THE PROBLEM -

If you have another service item, you currently charge for that would be not permitted then we would recommend making these inclusive in the rent – The way you can achieve this is to issue a Notice of a rent increase and vary your agreement prior to next renewal [or before 1 June 2020] so includes such service/item

Late Rent Fees

You will no longer be able to charge for issuing Section 8 Notices, Section 21 Notices, Rent Reminder letters and only be permitted to charge interest after 14 days that the rent is overdue. Such interest will be at the optimum calculation of Bank of England Base Rate + 3% [no more]

Lost Keys or security Fobs

Total cost more than £50 - Such must be reasonable costs for which you can evidence – Example key receipt £2.50

Prohibited Payment - Penalties and Fines - The Sledge Hammer

If you take a prohibited payment and breach the rights of the tenant or relevant person YOU MUST return all said monies within 28 days otherwise you lose the right to issue a section 21 Notice until such breach remedied. Also, you become exposed to further penalties and fines

The law does permit the monies be used against rent / deposit BUT ONLY with the consent of the person. See the PIMS Holding Deposit Form for new laws 1st June 2019

Failing to comply with the law means

Warning Renewing Tenancies

Where a tenancy is issued or renewed in England on or after the 1st June 2019 then the law shall apply.

As from 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.

• Example. July 2020, I charge a tenant a late rent letter or charge them to issue a Section 8 Notice. Such action would invalidate any Section 21 Notice Eviction process and expose you to a fine up to £30K if this were your second offence

Other CONSIDIRATIONS

Assigning, varying a Tenancy Agreement – £50 but maybe greater ONLY if reasonable cost may be demonstarted   - A payment is a permitted payment if it is a payment— (a) to a landlord in consideration of the variation, assignment or novation of a tenancy at the tenant’s request, or (b) to a letting agent in consideration of arranging the variation, assignment or novation of a tenancy at the tenant’s request.

But if the amount of the payment exceeds the greater of— (a) £50, or (b) the reasonable costs of the person to whom the payment is to be made in respect of the variation, assignment or novation of the tenancy, the amount of the excess is a prohibited payment.

Breach Damage Clauses are lawful A payment of damages for breach of a tenancy agreement or an agreement between a letting agent and a relevant person is a permitted payment. - Such clause shall need to be in the tenancy agreement so one can claim in accordance with deposit law protocol – One must make sure such clauses are lawful.

Inducement Payments from local housing authority/their representative or Greater London Authority, appear to be exempt - so Landlord and Agents incentives to grant tenancies to tenants they propose are permitted see sections Page 2 part 10

Letting Agents Disclosure of fees - Agents MUST clearly publish a page on their website where fees are clearly defined Section 18 Duty to publicise fees on third party website

• (3C) The agent must ensure that— (a) a list of the agent’s relevant fees is published on the third-party website, or (b) there is a link on that website to a part of the agent’s website where a list of those fees is published.”