New Law means Landlords and Agents can no longer charge fees to new and existing tenants.
From the 1st of June landlords and letting agents will be unable to charge new and existing tenants a fee for a tenancy. This means that landlords and letting agents cannot charge any money to a tenant in respect of a rented property other than rent and deposit. This new legislation also restricts landlords and letting agents from requiring tenants to enter into a contract for services or insurance. The same restriction apply to anyone working on the tenants behalf, for example a company, the council or a guarantor. A relevant person can seek recovery of a prohibited payment via the First Tier Tribunal.
There are certain conditions / restrictions to what constitutes a permitted payment. There are also strict rules for when (and how much) an agent can charge a tenant.
Overview:
Permitted Payments
There is a list of permitted payments (below) although many of them have restrictions or certain criteria that must be followed for them to constitute a permitted payment
1- Payment of rent under the tenancy
2- Tenancy deposit
3- Holding Deposit
4- Default Fee
5- Variation or assignment
6- Early termination
7- Council Tax
8- Utilities
9- TV licence
10- Communication services
Permitted Charges
1- Some tenancy breaches
2- Breakage/ loss of key or entry fob
3- Payment for damage (deducted from the deposit)
4- Early termination
Details:
1- Payment of rent under the tenancy
Illustrating how comprehensive the fee ban the legislation goes as far as to state rent is permitted: ‘a payment of rent under a tenancy is a permitted payment’. It should be noted that there are rules around reducing the rent so that fees cant be hidden in the rent (by charging a higher rent for the first month for example- this would not be permitted)
2- Tenancy Deposit
The second permitted payment as expected is the deposit. The restriction here is that it must not exceed 5 weeks’ rent.
3- Holding Deposit
The third permitted payment is a holding deposit which is limited to 1 weeks rent
4- Default Fee
The fourth permitted payment is a default fee.However this can only be in relation to keys and rent. Only the actual cost for the replacement of keys or access fobs can be charged and it must be ‘reasonable’
Rent default can only be charged can only be charge d at 3% above Bank of England base rate, regardless of the rate actually incurred by the landlord.
A payment of ‘damages’ is a permitted payment, this iss understood to allow for charges at the end of the tenancy where the tenant is in breach of the tenancy agreement, for example, causing damage to the property and the landlord then seeks reimbursement
5- Changes to the Tenancy
This deals with a payment where the tenant wants a variation, assignment or novation of the tenancy. This is chargeable by the landlord or agent but is limited to the great of £50 or the reasonable cost. This means that is a tenant wanted to change the rent payment date a charge could be made for issuing new standing orders etc.
6- Early Termination
A tenant who wishes to surrender the tenancy early can be charged the landlord’s losses, which includes reasonable agency fees. This could be a tenant leaving during a fixed term tenancy or a tenant leaving a periodic tenancy without the proper notice. The amount is limited to the landlord’s loss.
7- Council Tax
Another permitted payment is requiring the tenant to pay council tax.It would appear that council tax must be paid to the ‘billing authority’ suggesting a separate payment of council tax to a landlord is not permitted and would incur a penalty. Where necessary a rent including council tax would be a solution.
8- Utilities
Defined as electricity, gas or other fuel, water and sewerage. The legislation also clarifies that requiring a Green Deal payment as part of the utility bill is a permitted payment.
9-10 TV Licence and Communication services
Payment to the BBC is a permitted payment, therefore it is permissible to include this in the tenancy. It is also permissible to require tenants to pay for subscriptions for telephone services (other than mobile phone) broadband, cable and satellite services if the tenant requests them. The legislation prohibits landlords from requiring tenants to enter into contracts or make payments to third parties, but these payments can be re-charged by the landlord to the tenant, providing the charges made by the landlord do not exceed the reasonable cost incurred by the landlord in providing these services.
Tenant Fee Ban and Section 21 Notices
The government has introduced further restrictions on the use of a Section 21 relating to fees. It states that no section 21 notice may be given in relation to the tenancy so long as all or part of the prohibited payment or holding deposit had not been repaid to the relevant person.
For Compliance – Redress Scheme The Property Ombudsman -CMP Client Money Protect CMP005390
