Fees sought from tenants by landlords can often be a prickly subject. New rules came into force on 1 June 2019 concerning the costs that a landlord may pass on to tenants. This has been referred to as the tenancy fee ban.
All new tenancies granted on or after 1 June 2019 are subject to the new rules immediately. Then from 1 June 2020, the new rules will apply to all assured shorthold tenancies (ASTs). This will mean that landlords will need to review the payments that are routinely charged to tenants at the outset of a tenancy, as they may no longer be able to charge certain items to tenants which are now deemed prohibited.
Fluctuating rent payments
To prevent landlords concealing fees in an initial rent payment, they will be limited as to how they can fluctuate certain rent payments. For example, a landlord will no longer be able to charge £950 in the first month of a tenancy and then £700 from the second month onwards.
Limits as to the amount of rent deposit which can be taken are being brought in. For properties with an annual rent of under £50,000, the deposit must not exceed five weeks’ rent.
Default fees (i.e. fees charged by a landlord to tenant for late payment or the replacement of lost keys) can only now be charged if they have been expressly stated in the tenancy agreement. The new rules state that the default fee must be reasonable and should reflect the costs incurred by the landlord.
Early termination fees
Where a tenant wishes to leave a tenancy early, the landlord may charge an early termination fee. However, this must not exceed the amount of financial loss suffered by the landlord due to the tenant leaving early. Landlords must provide evidence of specific losses that have been incurred, for example, loss of rent or re-advertising charges.
As normal, tenants are responsible for paying council tax, utilities and internet bills at rental properties in accordance with the normal terms of their tenancy agreement.
If you are charged fees by a landlord which are not set out in the above list, it may be possible that the landlord is prohibited from charging them to you. Examples of prohibited payments include the cost of preparing an inventory, undertaking credit checks through a third party on incoming tenants or charging for professionals to clean the property at the end of a tenancy.
What if the landlord charges prohibited fees?
Where landlords don’t comply with the limitations of the new legislation, Trading Standards have a duty to enforce. Further, tenants can seek to recover prohibited payments from rogue landlords from the First-tier Tribunal (Property Chamber). Breaches of the rules carry a penalty of up to £5,000. Alternatively, prosecutions are available under the Housing and Planning Act 2016 which can lead to an unlimited fine. Landlords who persistently breach the fees rules also risk being placed on a rogue landlord database by a local authority.
Considering the new legislation comes into force on 1 June, landlords should review their current practices to ensure that none of the fees they are charging tenants are prohibited. This is clearly going to have a big effect on residential tenancies and the penalties for non-compliance are costly. If you are a landlord and require advice on the new changes you should seek assistance from a solicitor.
Article first published in Leeds City Dweller Magazine.