In January 2019 a new piece of legislation called the Tenant Fees Act became law after gaining Royal Assent in parliament.
This will ban all fees charged by landlords or letting agents to tenants, except in a handful of circumstances.
What does this mean for those who rent? What will and won’t you be charged?
Here’s a closer look at the tenant fee ban.
What is the tenant fee ban?
The tenant fee bill is a response to complaints made by tenants. For many decades, they have felt the fees charged by letting agents and landlords to begin, run and end tenancies have been too high and unfair.
The government announced in November 2017 that it was to ban all fees.
After much debate and attempted horse-trading by interested parties, including letting agents and property managers, the government pushed through the tenant fee bill to the house of commons and house of lords. It then took a year to receive Royal Assent.
This is part of a plan to make the private rented sector more affordable.
What will tenants have to pay?
In a nutshell, the Tenant Fees Act bans all fees, and means that when tenants move into a property they only have to pay the first month’s rent in advance, plus a deposit of no more than five week’s rent and (sometimes) a refundable holding deposit of up to one weeks’ rent.
Tenants will still have to pay their landlord or letting agent for any ‘reasonably incurred’ costs during the tenancy. This may include replacing lost keys, or if someone breaks their tenancy early or to replace a broken smoke alarm. The cost has to be the tenant’s fault.
When will this bill come into effect?
The act comes into force on 1 June 2019.
Are tenancy renewal fees legal?
After June 1st 2019, tenancy renewal fees will be one of the charges that letting agents and landlords will be unable to ask tenants to pay.
A renewal fee is supposed to be the cost of the paperwork when a tenancy agreement (usually an Assured Shorthold Tenancy) comes to an end and needs renewing. This is normally between six and 12 months after it begins and every year thereafter. But not after June 1st!
What fees are letting agents/landlords currently allowed to charge?
The letting fee ban will make a wide range of charges illegal. But the most common are:
- Moving in or moving out inventory/admin fees
- Renewals of tenancies
- Fees for referencing a tenant
- Guarantor fees (when a tenant uses a parent or other person to guarantee they will pay the rent)
- Administration fees
- Pets in property ‘permission’ or other fees
- Tenancy or service arrangement fees
- Application fees (for drawing up new contracts/tenancies)
- Right to Rent check fees. These are the checks that landlords are required by law to make on all prospective tenants over 18 years of age to ensure they have the ‘right’ to rent in the UK
- Credit check fees
- Professional cleaning fees. Tenants can be charged for a property to be cleaned after they move out as this can be deducted from their deposit. But they cannot be charged a fee to arrange the cleaning, as some agents have done in the past
After June 1st, what fees can letting agents or landlords charge tenants?
Tenants will still be charged:
- Rent – usually a month in advance
- Security deposit – up to five weeks’ rent
- Holding deposit – up to one weeks’ rent
- Payment to change the tenancy – set at £50 but can be higher if more costs are incurred by the letting agency. These must be justified
- Payments for utilities, broadband, TV Licence and council tax if applicable
- Default fees – where the tenant does something that costs the landlord or letting agent money to fix or chase, such as late payment of rent
How will the tenant fee ban work?
Tenants are entitled to be repaid any illegal fees that a letting agent or landlord charges them, plus interest. If a tenant believes they have been charged such a fee, they should contact their local Trading Standards or local council who will investigate. Landlords and letting agents can be fined up to £5,000 for an initial breach of the Act.
How much will tenants save after the tenant fee ban?
The government has claimed that the letting agent fees ban will save tenants on average £70 per household or in total £240 million a year. That’s spread across all renting households though. Other government research points to tenants saving £300 every time they move home, on average.
What can you do if a letting agent tries to charge an illegal fee?
First of all, challenge them on it. It may be an honest mistake and they will then withdraw the demanded fee. If a tenant has already been charged an illegal fee, or they feel that an agent or landlord is genuinely trying to rip them off, they should contact their local Trading Standards team by contacting the local authority switchboard.
Will the tenant fee ban push up rents?
Many organisations have argued that letting agents will increase their fees to landlords to recoup their lost income after the ban, and that landlords will raise their rents to pay for it. Until the ban has been law for a while after June 1st, no one really knows what will happen.
We’re here to help guide you through the property minefield. Renting is much easier when you have the right tools and research at your disposal. We can help. Find our advice for tenants here, or check out our renting resources.