Stop Press – law on tenant fees about to change

Stop Press – law on tenant fees about to change

To whom does it apply and what are the primary changes?

The Act will apply to the majority of the private rented sector in England – including assured shorthold tenancies, tenancies of student accommodation and licences to occupy.
Landlord and agents cannot require tenants to make loans or enter into contracts for services or insurance, except contracts for utilities and communications.
Landlords or agents are prohibited from charging tenants any fees or other payments which are not included in the exclusive list of permitted charges/payments listed below.

What are the permitted charges/payments?

A refundable tenancy deposit – capped at five weeks’ rent if the annual rent is less than £50,000 per annum
A refundable holding deposit capped at no more than one week’s rent
A default fee for late payment of rent or loss of keys, where required under a tenancy agreement
Variation, assignment or novation of the tenancy at the tenant’s request capped at £50 or reasonable costs incurred if higher
Payments associated with early termination by the tenant
Payments in respect of council tax, utilities and TV licence.

What are the key dates?

The Act will apply to all new and renewal tenancies and licences (excluding periodic tenancies) from 1 June 2019.
From 1 June 2020, the Act will apply to all tenancies and licences – existing and new.

What are the consequences of non-compliance?

Any tenancy which breaches the restrictions will not bind the tenant or the licensee
The excess of security deposits currently held must be returned to tenants
Landlord or agent could face a fine of up to £5,000 for a breach;
A second breach within five years will be a criminal offence and could result in a fine and a banning order, preventing the letting of properties for a minimum of 12 months
Tenants and licensees can pursue the landlord or agent for any amounts paid (plus interest)
Note in particular that Landlords will be unable to recover possession of their property via the section 21 eviction notice whilst they are holding prohibited payments.

Next steps?

Ensure all new agreements/renewals entered into from 1 June 2019 only request permitted payments; and
For all existing tenancies, carry out a thorough review of all payments received under that tenancy and ensure they constitute a permitted payment. Make arrangement for any payments which fall outside that list to be repaid to the tenant before 1 June 2020.

When conducting the review of payments, particular attention should be paid to:

Any payments received as a penalty for breaching university regulations/procedures, for example disciplinary fines
Payment of rent including insurance cover with a third party provider; and
the default fees charged for replacing keys/security fobs. The fee must be the reasonable cost incurred and a tenant can refuse to pay it unless written evidence, in the form of an invoice or receipt, is provided.