Important news for landlords which may have a huge affect the lettings industry.
TENANT FEES BILL – Comes into force on 1ST JUNE 2019
At Accord we are proud to have never charged excessive fees to landlords or tenants. Our current tenant application/referencing fee is just £120 inc VAT per tenant or guarantor, that is just £100 plus VAT. Fortunately this means that not being able to make this charge to tenants will not be catastrophic. Other agencies, particularly larger agents will have a fee structure which costs tenants between £500 and £1000 per tenancy. Time will tell us the result of this legislation but it will very likely mean a rise in fees charged to landlords. Here is a run down of what the proposed legislation involves. This is reported from directly ARLA Propertymark’s latest news on the issue.
The Bill will ban almost all charges made to tenants. Other key measures of the Bill include:
- Security deposits must not exceed the equivalent of five weeks’ rent. (Originally six weeks but amended recently to five.)
- Holding deposits will be capped at no more than one week’s rent. The Bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.
- The amount that can be charged for a change to tenancy will be capped at £50 unless the landlord demonstrates that greater costs were incurred.
- A fine of £5,000 for an initial breach of the ban with a criminal offence where a person has been fined or convicted of the same offence within the last five years. Financial penalties of up to £30,000 can be issues as an alternative to prosecution.
- Trading Standards will enforce the ban and make provisions for tenants to be able to recover unlawfully charged fees via the First-tier Tribunal.
- Landlords are prevented from recovering possession of their property via Section 21 until they have repaid any unlawfully charged fees.
- Enabling the appointment of a lead enforcement authority in the lettings sector
- The Consumer Rights Act 2015 will be amended to specify that letting agency transparency requirements should apply to any third-party websites such as property portals.
- Local authorities will be able to ring-fence any money raised for future local housing enforcement.
Some interesting details are below:
- A contract (tenancy agreement) must be signed within 15 days of having received a holding deposit. At Accord, we usually get the tenancy agreement signed on check in but this may have to be done sooner, which will mean the full balance of funds will need to be received from the tenant before the agreement can be signed. This 15 day period can be extended with express (written) agreement of the prospective tenant.
- It will no longer be possible to take a higher deposit if the tenant/s have a pet. A possible answer, other than not to permit pets of course, is to charge a higher rent to tenants with pets.
- A holding deposit must be returned if references fail, except if the tenant has been deceitful. So it will be important to have a comprehensive tenant application form. If the tenant states on the application form that they have no CCJs but they do, then they have lied and the holding deposit can be retained against costs.
- In future, will tenants apply for multiple properties because they have no risk of losing their holding deposit. They could go through several referencing processes (which cost £s to the agent) and then make a decision to go ahead with just one and request holding deposits be returned on all the others.
- Tenants can be charged for a breach of tenancy but these must be listed in the tenancy agreement. For example for late rent, lost keys, missed appointments, unreasonably refused contractor appointments, etc.
- The cap on tenancy deposits will only affect new tenancies on or after the ban comes into force. However, one year after the introduction, all tenancy deposits must be compliant on renewals. So any tenancies where the deposit is higher than the capped level, will need to have the amount over that level refunded to them.
- Fees for a change of sharer of £50 are deemed acceptable.
- If a tenancy is surrendered, reasonable fees may be charged to that tenant but cannot be more than the value of the rent for the remainder of the tenancy.
We will keep you informed of what all of this means in relation to the properties we manage on your behalf.