The government introduced a wide-reaching ban on tenant fees at the beginning of this month. Sabrina Rahman highlights how landlords must respond to the changes…
I understand tenants can no longer be charged for various services, such as referencing. How will this affect me as a landlord?
Back in February we discussed the introduction of the tenant fees ban, which was implemented at the beginning of this month. From now on, landlords and letting agents in England are unable to charge new tenants for certain services, including referencing and signing renewals, which means the costs will fall to you.
In a year’s time, the ban will also extend to older tenancies and any clauses in them referring to fees will become ineffective. If you take a prohibited payment, you will have 28 days to return it before you are considered in breach of the legislation.
The ban affects shorthold tenancies, student accommodation and licenses, although there are exceptions, namely company lets and non-assured tenancies. Some fees are exempt, including holding deposits, rent, bonds and charges for defaulting on a contract, but charging for any of the following is now forbidden:
- Supplying a guarantor form
- Referencing and credit checks
- Producing inventories
- Cleaning or gardening services
- Having fleas removed from the property
- Administration charges
- Requirements to have specific insurance providers
Landlords and agents can still charge for certain small sums if the tenant asks to surrender their lease. It is worth noting, however, your ability to serve a Section 21 notice is restricted whilst you hold a prohibited payment.
Does the legislation impact on tenancy deposits?
Yes. When you renew your tenancies, you now need to make sure the deposit you take is not more than five weeks’ rent (six if the annual amount is more than £50,000). If you take any money above this limit, it must be returned within 28 days.
The legislation is worded in such a way that you can’t get around the fees ban by charging rent at a higher level for the first part of a tenancy and then dropping it later. You can still use a zero-deposit scheme, although any breach of the fees ban will result in the County Court awarding the tenant the money paid, plus interest charged from the date the prohibited payment was taken.
Failing to observe the new legislation could incur you a fine of £5,000 for a first offence and a criminal record for any subsequent transgressions. Alternatively, you could be handed a civil penalty of £30,000 and made the subject of a banning order.
Can I still charge the tenant for damage to my property?
If your tenant has breached their agreement and caused damage as a result, you may still deduct the money for repairs from their deposit, or take court action.
You can leave clauses in your contracts allowing you to recover the costs associated with any claim, but you cannot set a fixed fee for any damages incurred, unless it is specifically permitted. Landlords are only allowed to charge for two types of default payments – the loss of keys and late payment of rent – and both are subject to restrictions.
What about third-party payments? Surely, they aren’t banned?
The legislation does include some mention of third-party payments, but you are still permitted to include contractual clauses stipulating tenants are responsible for the television license and the council tax. Other permitted clauses include those requiring tenants to pay your costs for the provision of a specific utility or communication service, for example, phones, broadband or cable.
In light of the new regulations, it is vital to review your tenancy agreements to ensure they are still fit for purpose.