Regulation and Enforcement

Tenant Fees Bill – what do I need to know?

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Sally Walmsley
Written by Sally Walmsley

The Tenant Fees Bill is set to come into force on June 1 this year, it has been announced. This means that, subject to the bill getting Royal Assent, the ban will apply to all tenancies signed after this date.W

Once the ban comes into force you will only be allowed to take payments for rent and deposits from tenants – with rules around the size of the deposits and how they are dealt with significantly tightened.

Deposits will be limited to five weeks, where annual rent is below £50,000 with new, stricter rules on holding deposits.

Aside from being able to charge for damages caused by the tenant, there are just two other ‘default fees’ you will be able to charge, if either:

  • the tenant loses their keys or 
  • is late paying the rent. 

These fees will also be limited. 

In the case of lost keys, you will be able to charge for the cost of replacing them and reasonable costs.

However, these costs MUST be evidenced in writing, for example through receipts for the keys and petrol used etc. You cannot charge for your time or the inconvenience.

When it comes to rent arrears, the government’s new rules say you can charge 3% above the Bank of England base rate in interest, from the date. At the time of writing this would be 3.75% interest. 

In practice, this will usually be for a tiny amount of money. While it will be calculated on an individual basis, a tenant who is two months late paying a month’s rent (set at the national average) could be charged just £4.47.

Landlords can still charge for a change to the tenancy requested by the tenant, with £50 considered the ‘norm’ in government guidance. Any charge above this figure would need to be backed up with written evidence. 

Similarly, if tenant wants to leave the contract early, they will be liable to pay the rent up to a maximum of the length of the fixed term of the contract.

Consequences

The consequences for charging a fee that is not permitted are far reaching.

Tenants will be able to reclaim the money they have paid via the county court – with interest – and trading standards will be able to fine you up to £30,000.

You will also be unable to serve a Section 21 notice if you have charged a tenant a fee where you shouldn’t have and kept the money.

For a full guide to the tenant fees ban visit www.rla.org.uk/feeban

If you have any other queries about your responsibilities call the RLA advice team on 03330 142998.


About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Communications Manager for the RLA and award-winning Editor of RPI magazine. With 16 years’ experience writing for regional and national newspapers and magazines she is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and editorial content for our media partners.

She issues press releases promoting the work of the RLA and its policies and campaigns to the regional and national media and works alongside the marketing team on the association’s social media channels to build support for the RLA and its work.

34 Comments

  • Having read the article on the tenant fee ban, specifically regarding pet treatment, I feel this will in a great number of cases, cause landlords to reject applicants with pets. Would it be legal to offer a two tier rent for a property ie 1 with and 1 without a pet?

    • No this would be seen as an additional ‘fee’ for allowing pets. The only way any charge could be applied would be if the tenant asked if they could keep a pet and vary the tenancy to reflect that. In this case you could charge a £50 fee for changes to the tenancy agreement. However this would be a single, one-off payment.

    • The guidance says you MAY be able to charge for time if you can evidence the inconvenience – but this would most likely be in circumstances in which a tenant had called in the middle of the night for example.

      The government guidance says: “Generally, we do not consider it reasonable for landlords or agents to charge for their time under a default fee. In exceptional cases, it may be appropriate, but the onus will be on the landlord or agent to demonstrate that they have incurred business costs as a result of the default. If it concerns an agent, the agent would be expected to demonstrate that they have provided a service which is exceptional to the day-to- day management responsibilities undertaken on behalf of the landlord.

      As outlined in the article you can charge for the cost of replacing the keys and any cost to you in terms of travel expenses etc. However these costs must be evidenced.

  • Slightly concerned about this.

    We usually charge one months rent as deposit and have charged extra if a tenant wishes to have a dog at the property.

    We have one tenant who is paying £700 per month (£8400 pa). We hold a deposit of £700 and a further £350 deposit to cover one dog so a total of £1050. Just to clarify from June 2019 the maximum deposit that can be held is £807 (5 weeks @ £8400 pa)?

    If this is the case and I am already holding £1050, if they renewed the lease would I need to refund?

  • Will you be able to charge an initial two months rent and then monthly rent after the first month in case tenants leave early without giving notice.

    Also have how are credit checks with agencies viewed. Will you be able to charge for this service if it accurately reflects the real cost

    • You cannot charge a fee for performing credit checks. You can take rent in advance but it must be used exclusively for rent and not used to recoup losses for other breaches of contract such as lack of cleaning or disrepair.

  • Would it be permissible to pass on to someone requesting a tenancy the charge for a credit report, and then refund it in the event of the tenancy being taken up? Will it be permissible to pass on the charge for a credit report made in respect of someone offering to stand as guarantor?

  • At the outset of a new tenancy can you take the “last” month’s rent along with the first month’s rent and Deposit?
    This common practice in other countries, e.g. USA.

  • As this bill means landlords can no longer charge the £22 RLA cost of refference checks for a new tenant, are we allowed to request potential tenants have themselves checked by the RLA before applying to rent.

    Saving delays for tenant and landlord on filling a vacant dwelling
    Stopping repeated checks on the same tenant by multiple landlords costing time and money.
    Helping stop discrimation as tenant knows they meet the rental criteria.

    Secondly can a holding deposit be taken while references are performed as long as it is returned to the potential tenant if they fail the checks.

    Preventing reference checks being approved only to find out the tenant has found somewhere else to rent, again wasting landlord time and money.

    • Regarding referencing, while that is available in Scotland it is not an option in England. Landlords and agents are expected to pay these costs for successful tenants.

      Holding deposits are limited to 1 week of rent and can be taken while the reference checks are being performed. If the tenant, backs out, provides false or misleading information, or fails to provide you with sufficient information within the 15 day time frame, then landlords do not have to return the full amount of the holding deposit to the rejected tenant. If the landlord backs out for their own reasons then they will ave to refund the whole amount.

  • Aren’t we allowed to cover the costs of the credit checks? So anyone can apply with terrible credit history and we have to keep doing viewings and empty our pockets on endless credit and background checks. This is unbelievable. Tenants ought to pay something when they decide to move!

    • I am afraid credit checks are among the list of banned fees.
      The list includes, but is not limited to:
      Charging for a guarantor form
      Credit checks
      Inventories
      Cleaning services
      Referencing
      Professional cleaning
      Having the property de-flead as a condition of allowing pets in the property
      Admin charges
      Requirements to have specific insurance providers
      Gardening services
      To read the RLA’s full guide on the changes visit: http://www.rla.org.uk/feeban

      • If the landlord or agency was to pay for a professional clean prior to the tenant occupying the property, can the tenant be instructed to carry out a professional clean when vacating the property still (to return the property back in the condition they received it)?

        • This boils down to the standard of cleanliness. Landlords should avoid using clauses like ‘you must have the property professionally cleaned’, as that may be considered unfair, but asking them to return the property to you in the same condition it was let out in is fair. I hope this helps.

  • Dear RLA
    Thank you for summarising the Tenant Fees Bill. Most helpful.
    I assume, from this, that the fees normally charged to the tenant by letting agents will now fall to the tenants, so the cost of letting a property will significantly increase.
    Would you agree with my assessment of the situation?
    Regards
    Ron Salmon

    • Hi Mr Salmon, just to clarify, when you say this: I assume, from this, that the fees normally charged to the tenant by letting agents will now fall to the tenants, so the cost of letting a property will significantly increase. I presume you mean ‘will now fall to the landlords’ .
      In answer to the question we think this is likely to happen in a lot of cases. Indeed the government has estimated this will cost landlords £82m in the first year alone. Some agents may be able to absorb the extra costs – but it is likely many will pass them on to the landlords. RLA policy director David Smith raised concerns with the CLG select committee on this issue last year.

      • Clearly this Act shifts a large number of costs from prospective tenant to landlord, that can only result in higher rents, the question is just how much cost is absorbed, and where.
        On the issue of a capped deposit a defaulting tenant that leaves with the final month’s rent unpaid, effectively leaves the landlord with one weeks rent to cover all cleaning, damage and repairs. Its no longer permissible to require tenants to insure as part of the tenancy agreement and so, as a landlord, I am now almost compelled to take out “landlord insurance” otherwise tenant risks are simply too high. But that is another cost that can only be recovered through an increase in rental costs. Rental increases to cover the transfer of costs and risks are substantial, has anyone undertaken an assessment of the impact of the Act – can anyone provide link to public domain documents?

  • When you take a holding deposit and you have ask the tenant about there finances and do they have any cj and they have told you they have no cj’s and good credit, then you do a credit checks and they fail it,can the credit check cost be with held from the holding deposit or would you have to return all holding deposit back ?

    • No, you would not have to return the deposit in full. The guidance states: Repayment does not need to be in full if the tenant backs out of the tenancy agreement themselves, fails right to rent checks, has provided false or misleading information, or where the landlord tries their best to get the information needed but the tenant fails to provide it within the 15 days.

  • Could you clarify whether this means that if within the tenancy agreement you have stated carpets are to be professionally cleaned prior to moving out, this would be classed as a fee?
    And if they did not have them cleaned you couldn’t charge a fee, but could withhold some of the deposit?
    Thank you,

    • A clause that requires a tenant to professionally clean the property at the end of their tenancy may already be considered an unfair term under the existing legislation.
      While the tenant fees ban would restrict this further, you would be well advised to amend the clause to require the tenant return the property to you in the condition it was let out in.
      If you have had the property professionally cleaned at the outset then the property should then be returned to you in the same state. If not you can seek deductions from the deposit.
      This would need to be evidenced, so it is worth recording the fact the property was cleaned to a professional standard in the inventory and backing this up with pictures.

  • 1 I have properties about to go contractual monthly periodic (RLA ASTs). I hold 6 weeks deposit. Do I have to return part of the deposit to bring it down to 5 weeks and if so, when?
    2 I have other properties already on statutory monthly periodic were I hold 6 weeks deposit. Do I have to return part of these deposits and if so, when?

    • 1. The legislation will not impact on periodic tenancies that exist before June 1st 2019 immediately. The legislation will come into force from June 1st 2020 for these tenancies. The situation for contractual periodic continuations is unclear due to poor wording in the legislation. It is likely however that a tenancy that starts as a fixed term before June 1st 2019 and then moves into a contractual periodic tenancy after June 1st 2019 will not be caught at all by the legislation.

      2. Any time a statutory periodic tenancy comes into force after June 1st 2019 then yes you will have to return any of the deposit money above 5 weeks.

  • Hi, Landlords are in for more costs by the look of it.
    Can or is there any way these costs can be offset in yearly Tax returns as “Costs” or other descriptions?
    My agent is charging me an extra £25 per month for this thus reducing my annual earnings .
    Will I still be sent my annual earnings statement, before any of these deductions, this showing a higher net profit than the actual loss of profit for me for the year?

    Thank you

    • If a landlord instructs an agent to manage the property, then these costs are allowable when calculating rental profit. So if the agent is increasing costs, then these increased costs can still be claimed on landlords’ tax returns.

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