The Business Legal Services Blog

Letting fees: Will a ban effect me as a landlord?

I’ve heard the government is to ban letting fees. Will this have a direct effect on me as a landlord?

The Tenant Fees Bill will be implemented in June (having been postponed from April) and will stop charges being levied against assured shorthold tenancies, including student lets. As such, it will affect all landlords and agents using these types of agreement.

There is a concern that, if your current tenancy allows for certain charges, they may make Section 21 notices invalid.

The ban will only apply initially to renewals and new tenancies, excluding statutory and contractual periodic tenancies that arise after June 1. It appears fees won’t be banned on pre-existing agreements for another year.

A range of fees that landlords and agents currently apply are being outlawed, namely charges for guarantor forms, credit checking, taking up references, inventories, domestic or professional cleaning and flea removal as a condition of allowing pets. In addition, administration costs will no longer be allowed, along with requirements to have specific insurance providers or gardening provisions.

Charges that will be exempt from the ban include holding deposits, rent, bonds and fees relating to contractual defaults.

Any clauses in existing agreements that permit the prohibited charges will become ineffective from June 1, 2020. If a landlord or agent tries to take a banned fee, they must return it within 28 days, or it will render the Section 21 notice invalid. The payment can be refunded or reassigned as rent or deposit.

As a landlord, I would recommend you review your tenancy agreements and ensure they are fit for purpose before the new bill becomes law. It is also important to fully understand the changes that are taking place and the implications of non-compliance. You do not want to waste time and money serving Section 21 notices that may be ineffective.

Also consider what fees you will incur from June onwards, as cleaning, for example, will not be recoverable from tenants. You may, therefore, face having to increase your rents or suffer heavier costs.

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