The private rented sector has seen new legislation come into force en mass over the last few months. In these Covid times you could be forgiven for missing one or two of the changes. But missing this one may lead to you being fined £30,000.
No More Fees
The Tenant Fees Act 2019 limits letting fees and caps tenancy deposits paid by tenants in the private rented sector. From the 1st of June 2020 the Act applies to all tenancy agreements.
If a landlord has charged a banned fee, tenants can reclaim their money through the county court. Charging unlawful fees can amount to a £5,000 fine for a first offence and a £30,000 penalty can be issued for a second offence that occurs within 5 years of the first. Even if fees have been stated and defined in a tenancy agreement, if they are not set out by the Act, they are banned and not legally binding.
There are many fees that are now banned including: fees for defaults, termination, utility services, references, credit and immigration checks, administration costs, property viewings, inventory checks, “check-out” fees and charges for professional cleaning. It is perhaps easier to understand the limits of the charges by knowing what is allowed.
Landlords (directly or via an agent) can only charge their tenants:
A refundable tenancy deposit (capped at no more than five weeks’ rent where the annual rent is less than £50,000) as security against: if a tenant causes damage to a property, does not return it in its original condition, does not pay their rent, or breaks the terms of their tenancy agreement.
A refundable holding deposit (capped at no more than one weeks rent) to reserve a property, whilst undertaking reference checks and preparation for a tenancy agreement.
Payments to change the tenancy when requested by the tenant (capped at £50 or reasonable costs incurred if higher). A change to a tenancy is any reasonable request to alter a tenancy agreement including such things as enabling pets to be kept in the property or permission to sub-let.
Payments associated with early termination of the tenancy, when termination is requested by the tenant. These are generally restricted to loss of rent up until the expired notice period under the tenancy agreement, cost of re-advertising and referencing.
Payments in respect of utilities, communication services, TV licence and Council Tax. Tenants are responsible for bills if these are not included within their rent. However, landlords must not over-charge tenants where they pay utilities separate from the rent.
A default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement.
What does this mean for Landlords?
These changes may mean additional direct/indirect costs for landlords. For example, many letting agents have been increasing their Landlord fees or more commonly reducing their level of services so that they don't financially get hit by having to stop charging tenant fees. As such, either the landlord has to pay more agency fees, or has to get more involved in the management of their properties as agents do less work. Either way, the landlord loses out.
For most Landlords on Teesside, increasing the rent to offset these costs is not an option as the rental market has been largely stagnant in terms of rental values for over a decade. The same goes for self-managing landlords who charge tenant fees directly.
Taken into account with the additional cost brought in by the April legislation, namely paying for electrical safety certificates and improving EPC ratings, and with the up-coming ban on Section 21 notices, this all contributes to narrowing profit margins for landlords.
Understandably landlords are starting to feel the pinch and are rethinking their models. Many are selling up and divesting, seeing the clear signs that small private landlords are no longer welcome in the private rented sector. For Teesside landlords who have seen stagnation and depreciation of house values pre-Covid, many face the reality of further depreciating assets post-Covid and narrowing rental profit.
The ban brings England in line with Scotland and many other European countries. Scotland banned such fees back in 2012 and whilst they are still legal in Wales they will be outlawed by September 2020.
Need help or more information about managing your property?
The Ethical Lettings Agency (TELA) have always taken the position not to charge additional fees to landlords or any fees to tenants and are therefore well practiced in this new legislation. Contact one of their property professionals on:
01642 454485 www.ethicallettingsagency.co.uk
Need help or more information about selling your property?
The Ethical Housing Company (EHC) is buying, in pursuit of our social mission to house people in housing need including homeless people in Teesside. We do not charge fees and offer a fast and transparent purchasing process. We can quickly calculate an approximate offer with some basic information on your property; to get an offer please contact:
07555 946 853 www.ethicalhousing.co.uk
For more information on the Tenant Fees Act (2019) changes please visit: