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Tenant Fee Ban: 10 things every landlord should know

Updated: Jan 9

As from June 1st, private landlords and estate agents in England can no longer charge fees to tenants – saving tenants an estimated £240m. Known as the Tenant Fee Act, this new law has been introduced by the Government as ‘part of a wider package of measures aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector’. So, how will this change in legislation affect you? Here are ten things that every landlord with a property in England* needs to know …

1. You can no longer charge fees for credit checks, referencing and other admin fees

These include payments to most third parties, either for services throughout the tenancy or for specific performance of a job and loans from third parties. These include but are not limited to charges for:

  1. References and guarantor forms

  2. Credit checks

  3. Gardening and professional cleaning services (including having a property de-flead as a condition of allowing pets in the property)

  4. Inventories etc.

In a nutshell, any fee that is in the tenancy agreement will be void unless it is listed as a permitted payment.

2. Be aware of the cost of getting it wrong

It is essential you understand and comply with this new legislation. Failure to do so will attract severe financial penalties – starting from £5,000. Further breaches could see you being charged with a criminal offence and facing an unlimited fine.

3. Review your current business costs

This new legislation doesn’t make life any easier for many landlords who typically have already tight profit margins, so now may be an excellent time to review your current business costs to see if savings can be made. For example:

  1. Look at your existing landlord insurance and mortgage arrangements and see if you can get a more attractive deal by switching provider

  2. Read up on your allowances to see if you can reduce your tax liabilities

  3. If you are still manually managing the paperwork for your properties, think about investing in dedicated property management software that can do it all for you. Not only will this save you time, but the regular reminders it sends you (such as renewal of property safety certificates) means you can always be compliant and never need to face a fine

  4. Review your utilities’ costs – landlords can require the tenant to use a specific utility or communications provider.

4. Holding deposits, rent and defaulting on contracts are exempt but have been tightened

There are additional restrictions for all of these as part of the legislation, so you need to be aware of these changes. For example, you can charge for two specific types of default payments – loss of keys (you can charge a reasonable cost if it is evidenced in writing) and late payment of rent. For the latter, you can charge 3% above the Bank of England base rate in interest on the late payment of rent from the date the payment is missed. At the time of writing, this would be 3.75% interest. You cannot charge for sending reminder letters.

Landlords can charge for changing tenants or allowing tenants to vacate the property early – subject to restrictions on costs, however.

5. Doing a thorough inventory will be essential

Damages can only be recouped through the deposit or court action so a thorough inventory will be vital. Where a tenant breaches their tenancy agreement, causing damage, you can seek compensation via deductions from the deposit or court action. You can leave clauses in the contract stating that you may seek costs for damages, but you cannot set a fixed fee for the damages incurred unless it is expressly permitted. This highlights the importance of a thorough inventory, including photographs of the higher value items.

6. Holding deposits will only be a maximum of 1 week’s rent, and you have 15 days to decide

Holding deposits will be capped at a maximum of 1 week’s rent, and landlords have 15 days to decide. Once a decision is made, you must notify the applicant of the decision within 7 days. This should set out whether the holding deposit will be refunded in full or whether any of it will be retained.

7. Security deposits will be limited to 5 week’s rent if the annual value is under 50K

Security deposits will be limited to 5 week’s rent as a maximum amount for tenancies where the annual rent is below £50,000. For annual rents of £50,000 or more, deposits will be capped to the equivalent of 6 week’s rent.

8. Existing tenancies do not come under the scope of the ban until June 1st 2020

The ban only applies to new tenancies and renewals of tenancies from June 1st 2019, excluding statutory and contractual periodic tenancies. After a year, in 2020, the ban will attach to pre-existing tenancies.

9. Carry on providing a great service to your tenants

In an increasingly competitive market where tenants will shop around, make sure your tenants don’t want to move anywhere else by providing them with a great service! Systems and processes that help improve and streamline your service can only help. With the Go Tenant! system, for example, our Tenant app allows your client to report maintenance issues quickly and easily. It also allows secure communication for general updates as well as providing tenants with access to their documents and information all in one place.

10. Check your systems, processes and contracts

Keeping on top of your property investment business can seem like piles of paperwork, unconnected spreadsheets and ever-changing legislation. But it doesn’t have to be like that. By reviewing your current arrangements, you may find that you can save time and provide a sleeker service to your client by using a property management system.

Having an easy to use property management system that reflects new legislation as it happens, and auto-sends legal documents, means you should always be compliant.

At Go Tenant!, our property management system offers all these facilities, plus many more to help a busy landlord. You find out more about our product features here. Or to start a free, no-obligation 28-day trial, complete your details here to get started.

* Ban on tenant fees for landlords in Wales comes in to force in September 2019, while in Scotland the ban already exists.

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