The Tenant Fees Bill received Royal Assent on 12 February 2019 meaning that it is now the Tenant Fees Act and will come into force on 1 June 2019.
In summary the Act bans letting fees paid by tenants to an agent or landlord in the private rented sector and caps tenancy deposits in England.
The aim of the Act is to reduce the costs that tenants are expected to pay at the outset of a tenancy and to see at a glance what a property could cost them without any hidden charges. Landlords will no longer be permitted to charge tenants fees for the tenancy and where they elect to instruct an agent, they will now be expected to settle any agents fees directly.
The government is expected to publish guidance to assist tenants, agents and landlords. However, the Act itself does include at Schedule 1 a list of permitted payments which an agent or landlord can still expect tenants to pay. In summary the list is as follows:
- Tenancy Deposit – 5 weeks deposit is permitted for tenancies where the annual rent is £50,000 or less and 6 weeks deposit where the annual rent is above £50,000
- Holding Deposits – limited to 1 weeks rent
- Payment in the event of default – the tenancy agreement must contain a provision permitting such a charge and it can only be applied for the loss of a key or other security device or where rent is more than 14 days late. In order to recover the payment, the charge must be reasonably incurred and (for loss of keys) supported by some form of evidence, such as a receipt.
- Payment on variation, assignment or novation of tenancy – this charge can be applied by the landlord or the agent for agreeing or arranging the variation etc. The charge should not exceed £50 or the reasonable costs incurred by the landlord or agent for the variation etc.
- Payment on termination of tenancy – this charge is applied if the tenant terminates the tenancy during the fixed term period or during a periodic period without giving the contractual or statutory notice.
- Payment in respect of council tax
- Payment in respect of utilities
- Payment in respect of television licence
- Payment in respect of communication services – this would include, satellite, internet and telephone services.
The Act does not include a list of payments or charges that are prohibited. What this means is that if a payment does not fall into any one of the above 11 categories then it is likely to be prohibited under this Act. Agents and landlords should therefore familiarise themselves with Schedule 1 of the Act and ensure that on 1 June 2019 they are prepared. Some agents may elect to include these permitted payments in their tenancy agreement however, this would be entirely optional. However, an Agent’s obligations to advertise fees in their offices and website under the Consumer Rights Act will continue.
It is important to understand that this Act does come into force with some complications for prospective tenants. A tenant seeking to rent a property will still need to have, for example, reference checks. Tenants might potentially therefore be asked to provide these checks or agents could offer to arrange the checks on their behalf for an optional fee. This along with other ‘optional fees’ will no doubt cause some confusion in the marketplace.