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What the Tenant Fees Bill means for landlords

By Guest Blogger on in Industry News, Letting

What the Tenant Fees Bill means for landlords

By Rose Jinks, Just Landlords

On the 3 May 2018, the much-awaited Tenant Fees Bill was introduced into Parliament. It’s expected to become law as soon as next year, so we explain what the bill means for landlords.

Fees charged to tenants banned

The most prominent measure included in the Tenant Fees Bill is that landlords and letting agents will be banned from charging administration fees to tenants. This is expected to save tenants a total of £240m per year and was designed to reduce the high cost of renting, which should help more tenants get onto the property ladder.

Landlords and letting agents can only charge tenants for:

  • Rent.
  • Deposits.
  • Change or early termination of a tenancy agreement.
  • Utilities, communication services and Council Tax.
  • Payments for default by the tenant, such as replacing a lost key.

Worryingly, it’s believed that letting agents may put their costs up for landlords to recoup the charges lost, while landlords are likely to put their rent prices up for their tenants. For this reason, it’s believed that the Tenant Fees Bill won’t achieve its aim of cutting costs for tenants.

Tenancy deposits capped

At the same time, landlords and letting agents will be prohibited from requesting a tenancy deposit of more than six weeks’ rent from tenants. This measure was created to make moving home more financially manageable for those renting their homes.

Additionally, holding deposits will be capped at no more than one week’s rent. It may also become a requirement that landlords and agents must return a holding deposit to a tenant.

While a deposit of six weeks’ rent is not uncommon in the current lettings market, some landlords and agents do require higher amounts from tenants for legitimate reasons, such as if the tenant has pets. This change may make landlords less likely to accept more vulnerable tenants, such as those on benefits, making their housing situation more difficult.

£5,000 fine imposed

The Tenant Fees Bill proposes a financial penalty of £5,000 for an initial breach of the lettings fee ban. This means that if you charge tenants fees that aren’t permitted under the new law, you may be subject to a £5,000 fine.

If an individual has been fined or convicted of the same offence within the past five years, they could be subject to a criminal offence. Financial penalties of up to £30,000 can also be issued as an alternative to prosecution.

The bill also proposes preventing landlords from recovering possession of their property through section 21 notices until they have repaid any unlawfully charged fees. So, if your tenant stops paying the rent or causes malicious damage to your property, you may not be able to evict them.

With so many changes potentially coming into force next year, as a landlord it’s essential you prepare early for how these rules could affect your lettings businesses. If you use a letting agent, you may want to discuss with them how they plan to manage the changes, so you can make an informed decision about if you continue using their services.

Remember to take into account how failing to comply with the new law could affect you.

Image credit: Nick Youngson CC BY-SA 3.0 Alpha Stock Images