As we edge closer to the government putting a ban on fees charged by landlords and letting agents to tenants. The impact this might have on letting agents and landlords is something they may want to start considering now, whilst it has not yet come into force and draft legislation is always subject to alteration it is still something that will have to be taken seriously.
Are the fees applied to older tenancies?
They will not apply to older tenancies immediately, however the renewal of tenancies will be subject to this legislation.
After one year the legislation will assign to pre-existing tenancies where charges are being applied, upon which they will become ineffective. If landlords or letting agents still apply these fees to their tenants they will be subject to pay them back within a 28 day time span or risk being in breach of this legislation.
Fees that are banned to the tenant
So any fee that is exempt, will not be able to be charged to the tenant through assured shorthold tenancy or license agreement.
Fees that are banned include;
Referencing
Cleaning
Gardening services
Credit checks
Admin charges
Inventories
Charging for a guarantor form
Fees that are exempt
There a few fees that will be exempt from the new legislation these include;
Deposits
Rent
Holding deposits
Charges for defaulting on a contract
Most required payments to third parties are prohibited, however a landlord can require the tenant to use a specific utility or communications provider. Agents are not allowed to require this however.
It is important to note that landlords can still charge to tenants for defaulting on a contract if they vacate early. Restrictions to cost will still be subject to how early they default on their contract.
Breaches of the tenancy agreement (default payments)
The legislation currently in date allows landlords to charge for two types of default payments - late payments and loss of keys.
The Bank of England's current interest rate is 0.75%, which allows agents and landlords to charge 3% above their current base rate for late payments. This means landlords and agents can charge a maximum of 3.75% - subject may vary upon writing.
https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
If the tenant was to loose their keys the landlord may be able to charge this back to the tenant, if there is evidence in writing. If there is no evidence in writing as a receipt then it will be difficult to charge to the tenant and may end up as a prohibited payment.
Breaches of the tenancy agreement (damages)
If the tenant has breached their tenancy agreement then landlords are still able to seek payment either through court action of deducting compensation from the tenants deposit.
Changes to the tenancy
Landlords and agent are still allowed to charge a fee to tenants if they want to either swap with a tenant or exit out of the tenancy agreement.
If the tenant wants to swap with another tenant then the landlord can charge a small fee of £50 for the swap or incurred fees. If any costs incurred to the landlord go above £50 then there must be evidence to support this as the draft guidance makes it clear that this is normal for agents and landlords.
Moving forward...
Moving forward it is important both landlords and letting agents consider their business models carefully as this is something that could drastically minimize profits as a result. It is important that landlords and agents have the correct tenancy agreements in place to abide by the new legislation, otherwise penalties will be incurred for failure to do so.
References
Rla.org.uk. (2019). Tenant Fees Ban Guidance. [online] Available at: https://www.rla.org.uk/landlord/guides/tenant-fees-ban-guidance.shtml [Accessed 4 Apr. 2019].
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