The New Tenant Fees Legislation comes into force on 1 June 2019. In this guide, we’ve highlighted the key points landlords should be aware as the law changes.
Put simply, the New Act is placing restrictions on the what landlords can charge their tenants/potential tenants by either banning certain costs completely, or capping them.
What can landlords charge tenants for?
Under the New Law, Landlords can only charge tenants the following payments:
- A refundable tenancy deposit (capped under new law)
- A refundable holding deposit (capped under new law)
- Fee to change a tenancy (capped at £50, or a reasonable amount if incurred cost is higher)
- Fee for early termination of the tenancy (when requested by the tenant)
- Bills – including utilities, phone and internet, TV license and Council Tax
- A fee for late rent payment or loss of key/security device
Any other charge not on this list is banned under the New Tenant Fees Act 2019.
The caps to tenancy deposits and holding deposits will have the largest impacts on how many landlords currently do business, so we’ve explained the changes below.
The Tenant Fees Act 2019 has placed a cap on tenancy deposits to the equivalent of five weeks rent. Landlords should note that this figure does not need to be precise, rather the annual rent divided by 52 (weeks).
- This will apply to all tenancies covered by the New Act, which includes Assured Shorthold Tenancies and Licenses that are not for holiday purposes.
- All tenancies signed from 1 June 2019 – tenancies that are agreed before this date but start after are not included.
- Tenancies renewed for a new fixed term from 1 June 2019 – those that become periodic after this date are not covered as no new money is being taken.
Things for landlords to consider:
For any fixed term renewals made after 1 June 2019, landlords are required to refund any excess of the deposit amount which exceeds five weeks rent to the tenant.
- Prior to a renewal, there is nothing preventing landlords from making deductions from the deposit to cover existing property damage or arrears of rent.
- Landlords can increase rent as part of the renewal and should re-calculate the deposit sum appropriately.
- There is less security for landlords who would usually charge a price sufficient of covering the last month’s rent, plus any further damages.
- Be mindful of tenants and the risk they pose to the property/your livelihood – e.g. are you prepared to allow tenants with pets without being able to charge a pet fee or insist on a professional clean to reduce/manage damage they may cause to the property?
- If the annual rent for a property is over £50,000, landlords can charge a deposit equivalent to six weeks rent.
For landlords who take Holding Deposits or use Agents who do, there are some key changes under the New Tenant Fees Act 2019 which should be noted.
- Ensure you or your agent have proper holding deposit agreements in place, which are written clearly to avoid any confusion for potential tenants who may be under the impression that a landlord is obliged to rent to them if a holding deposit is taken.
- Up to one week’s rent can be taken as a holding deposit.
- A holding deposit can be kept for up to fourteen days, after which a tenancy agreement must be entered or, an extension to the holding period agreed.
- If a landlord rejects the tenancy agreement, the holding deposit must be refunded.
- If the potential tenant chooses not to proceed after the landlord has offered a tenancy agreement, incurred costs can be taken from the holding deposit. No outlines of how much this should be or the criteria of the losses have been given in the new legislation so, it is arguable that landlords can keep the deposit to cover any lost opportunity to find another tenant.
- If a tenancy agreement is entered into, the holding deposit should be refunded, deducted from the tenancy deposit or credited to the rent account.
- Landlords or Agents cannot take holding deposits from multiple potential tenants at a one time.
- There are no restrictions on a landlord or agent taking a holding deposit from one prospective tenant whilst still marketing the property to others, so long as another deposit isn’t taken. Although, this should be made clear to tenants in the holding deposit agreement.
For any more information on the Tenant Fees Act 2019, or any other landlord and tenant issue, please contact our expert team on 0115 9 100 200, or send them an email.
Posted on May 31, 2019