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Hot Topic Highlight - Residential Tenant Letting Fee Ban

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What is today's blog about?

This week, we will be looking at the residential tenant letting fee ban. Essential reading for AssocRICS and RICS APC candidates.

You can also listen to our CPD podcast on Anchor for more free AssocRICS and RICS APC training and support.

What's new and from when?

The Tenant Fees Act 2019 received Royal Assent on 12 February 2019. The new legislation will come into force on 1 June 2019. Proposals had been discussed by the Government since 2016.

Why was the new legislation needed?

The Government considered that new legislation was needed to resolve the problem of affordability for residential private rented tenants, who totalled 4.7m households in 2016/17.

This primarily related to letting fees and high deposits, which the Government considered to lack transparency or be disproportionate to the level of service provided. According to Citizens Advice, the average 'administrative fee' paid by tenants is £400.

Who does the legislation apply to?

Both landlords and agents in England.

What does the legislation apply to?

Renewals of tenancies initially. After 12 months, it will also apply to existing tenancies. If a prohibited payment is taken after this time, the landlord or agent will have 28 days to return the payment to avoid breaching the new legislation.

What are the key changes?

Landlords and agents will no longer be able to charge their tenants fees for tenancies signed on or after 1 June 2019. These costs will need to be met by the landlord. If a landlord has not repaid any unlawfully charged fees, they will not be able to recover possession of their property using a Section 21 notice.

Examples of fees which will be banned include:

  • Credit checks

  • Inventories

  • Cleaning

  • Referencing

  • Administrative charges

  • Gardening

  • Charging for a guarantor form

Fees which can still be charged, but are subject to caps include:

  • Security deposits, capped at 5 weeks' rent (unless the annual rent exceeds £50,000, where the cap is increased to 6 weeks' rent)

  • Holding deposits, capped at 1 weeks' rent and subject to a repayment clause

  • Tenancy changes or early termination requested by the tenant capped at £50 or 'reasonable costs' confirmed in writing with supporting evidence

  • Tenant defaults, e.g. lost keys or late rent payment penalties (not exceeding 3% above the Bank of England base rent)

  • Rent, utilities and Council Tax

The Consumer Rights Act 2015 is also being amended to apply transparency requirements to online portals such as Rightmove and Zoopla.

What are the penalties for non-compliance?

£5,000 for an initial breach, with a criminal offence where a landlord or agent has been fined or convicted of the same offence within the preceding 5 years. As an alternative to prosecution, penalties up to £30,000 can be issued.

How can tenants challenge unreasonable fees?

Trading Standards will enforce the ban, with the First-tier Tribunal presiding over disputed fee cases.

Is there any further guidance available?

As of March 2019, the Government and RICS have not yet published guidance for landlords and agents on how to comply with the legislation. When this is published, we will comment upon it in a future blog article - stay tuned!

How can we help?

  • Head to our blog archive to access even more free CPD and AssocRICS and RICS APC training and support.

  • Download your free AssocRICS and RICS APC resources, including e-books and revision quizzes.

  • Find out more about our bespoke AssocRICS and RICS APC training and support, before booking your free 15 minute consultation and signing up for your services online.

  • Not sure about signing up? Make sure you read what our recent successful candidates have to say in our Testimonials.

Stay tuned for our next blog post to help build a better you

N.b. Nothing in this article constitutes legal or financial advice.


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