The Tenant Fee Ban and What It Means For Landlords

It’s now been over 2 years since Chancellor Philip Hammond announced that there would be a ban on fees charged to tenants.  Like any new law, it’s taken some time to work through the system, but now the deadline is coming fast (it may be implemented as early as April 2019) and landlords and estate agents across the country are preparing to adjust to the new way of working. So, what does it mean for you as a landlord, and for us as estate agents?


What Is the Tenant Fee Bill?

Although still in draft at the moment, in essence the tenant fee bill imposes a complete ban on all upfront fees that letting agents and landlords charge before a tenant can rent a property. These usually include administrative fees, credit checks and referencing costs. Under the new legislation, tenants can only be charged the rent, a refundable deposit (with a limit currently set at 5 weeks rent) and a refundable deposit to reserve the property (with a limit of one weeks’ rent and to be paid back within certain time-limits if the tenancy doesn’t proceed). The bill will probably come into force shortly after Client Money Protection becomes mandatory for Letting Agents in April 2019 and has brought a sigh of relief to many tenants in the private rented sector.


What Does It Mean For Landlords?

For landlords who manage their properties themselves, they will need to review their current tenancy agreements, documentation and methods to make sure they are complying with the regulations and new deposit guidelines. They will need to ensure all extra fees are cut out, and their tenancy agreement is legal. For landlords working with agents, the effect might be a bit more substantial. The likelihood is that many letting agents will increase their own fees in order to absorb the administrative fees, which means an increase in outlay. There are several ways landlords can choose to handle this, but what we suggest is speaking to your letting agent and finding out what their plans are, and how they can support you during this change.


FAQ’s About The Tenant Fee Ban

There are many questions about the ban and, while we can’t answer them all because the legislation is still going through parliament, here are a few of the most commonly asked ones, and their answers.

·        What Fees Are Banned? In short, any fees that the tenant (or someone acting on their behalf, like a guarantor) would have to pay as a condition of the granting, continuance or renewal of a shorthold tenancy. This includes any payments to a third party, for services relating to the granting of the tenancy.  The details are still be worked out, but it will include most fees that are currently charged, unless exempt.


·        So What Fees are Exempt? There are a few fees that are exempt from the ban. Mainly, holding deposits to secure a home while checks are carried out, rent payments, full deposits and some charges for defaulting on the contract.


·         Will It Apply to Older Tenancies? No. If you have a tenant in the middle of their tenancy, you will not have to do anything retroactively. However, when your tenants come up for renewal, the fee ban will apply to the renewal.


·         What Types of Tenancy Are Affected? Assured shorthold tenancies, student lets and licenses are the only things covered in this. So company lets and non-assured tenancies won’t be affected by the ban.


·         Are There Any Penalties? Of course. Where a breach is found, the landlord or agent who charged them will have to pay the fee back to the tenant via the court. If it’s a first offence, a fine of up to £5,000 can be applied. But if this isn’t the first breach, the fines handed down can go up to £30,000, and the guilty party can be subject to a banning order.


At Northwood, we always try to be up front and honest with both our landlords and our tenants. We are currently working hard to review our own policies and ensure we are in perfect compliance when the deadline comes.  There are no fees for landlords on our Guaranteed Rent service so we’re currently considering the best approach to take so as to be fair to those landlords who choose to use our traditional lettings services.  If you have any questions about the tenant fee ban, we’d love to answer them. Just get in touch with us today for your free chat.

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