Tenant Fees | Guide To Banned Letting Agent Fees
There are countless laws and rules in place designed to protect the rights of both letting agents and tenants when entering into a new agreement. Tenant Fee Ban is one such piece of legislation that was recently introduced in an effort to protect tenants from unfair charges. Tenants who don’t read the fine print or unaware of their rights are often taken advantage of.
This makes even the best letting agents look bad or face scepticism due to a few bad apples. Letting agents, landlords and tenants should be aware of the parameters of the Tenant Fee Ban and what it means for tenancy agreements moving forward.
Here, we’ll cover everything you need to know from when and why it was enacted and how to conduct business in compliance with this new legislation.
- When was the tenant fee ban created?
- What exactly is the tenant fee ban?
- What does the fee ban mean for tenants?
- How will letting agents be impacted?
- The penalties for non-compliance
- Tenant fee ban FAQ
When Was the Tenant Fee Ban Created?
The Tenants Fee Act was put into effect on the 1st of June, 2019.
This act made it illegal to charge unfair additional fees to tenants during the renewal process or when they enter into a contract on a new property.
This ban is automatically applied to all new contracts that were signed any time after the 1st of June, 2019. Starting 1 June of 2020, the ban will affect all other tenancy contracts.
What Exactly is the Tenant Fee Ban?
We already stated that the Tenants Fee Act ban prevents letting agents and landlords from applying unnecessary fees to tenants, but what fees does this cover?
To put it simply, the only fee that landlords can charge tenants is rent.
The ban eliminates any hidden charges and prevents landlords from adding fees later on.
Under the ban, the only permitted fees (in addition to rent) are those listed specifically in the contract as a permitted payment. These line-items include:
- A refundable holding deposit capped at 1 weeks rent
- Payments that change the tenancy but are requested by the tenant
- Charges for utilities, council tax, TV licence, and communication services
- Payments for early termination of the tenancy if requested by the tenant
- A refundable tenancy deposit no more than 5 weeks rent (or 6 weeks rent when the yearly rent is £50,000+)
- A default fee for late payment of rent or lost key or security device
- Cleaning fees when there’s extensive damage
So lets say your rent is £500 per week, the below shows an example of what you still could be charged for under the fee ban:
|Refundable holding deposit||£500|
|Changes to a tenancy||£50|
|Early termination fee||Dependent on the landlord or agents ‘loses’|
|1 weeks late rent||£15|
|Replacement key||£10 – £40|
The ban is also designed to create more open lines of communication in the rental market. While the ban offers many benefits for tenants, it’s created lost income for many landlords and letting agents.
What Does this Ban Mean for Tenants?
In the past, tenants were charged for a wide range of services including tenancy renewal and initial set-up, credit checks, referencing, and even administrative fees.
Letting agents would pass down insignificant fees like postage and the cost of phone calls to the tenant.
Most of these fees were hidden under the “administrative” umbrella.
Before the Tenant Fee Ban was put into place, there were no rules or regulations about how much an letting agent or landlord could charge.
That means that some letting agent fees were higher than others, forcing tenants to navigate an influx in pricing.
How will Letting Agents be impacted?
While the Tenant Fee Ban is good news for tenants, it’s having negative ramifications for many letting agents (whether traditional or online) and landlords.
Some professionals are predicting that these changes could cost landlords and letting agents between £50 and £160m! The truth of the matter is that this ban prevents dishonest landlords from sneaking hidden fees into tenancy agreements or charging tenants exorbitant rates for things they’re not responsible for.
Here are some of the specific fees that landlords and agents can no longer charge for:
- Third-party fees
- Check-out fees
- Viewing/Showing fees
- Any fees associated with setting up or renewing the tenancy (inventory, referencing, and credit checks)
The problem for many letting agents is that these letting agent fees make up a large portion of their monthly income. Some letting agents increase what they charge landlords to make up for this lost income.
But a loss of income isn’t the only thing landlords can expect thanks to this new ban. Those landlords who choose to increase rent to make up for these costs may experience longer vacancy periods.
Low funds mean the inability to make necessary improvements to the property, leading to less desirable candidates. After all, you can’t charge high rent on a dilapidated or run-down property.
Landlords often hire letting agents to help save them time and aggravation. Property management is a full-time job. Between finding and vetting tenants to scheduling viewings and performing maintenance, many landlords don’t mind paying estate agent fees if it means lightening their workload.
The Tenant Fee Ban, however, is forcing many landlords to consider managing these properties themselves.
Although this may save them money upfront, it could cost more in the long-run between the stress of self-management, time invested, and feeling overwhelmed by new (and always-changing) laws and regulations.
Penalties for Non-Compliance?
So, what happens if you decide to break from the norm? What happens when landlords or letting agents disregard these new regulations and continue to charge tenants for illegal fees?
Non-compliance shouldn’t be taken lightly.
Anyone that chooses to ignore the Tenant Fee Bad could be facing an initial fine of £5,000. If you commit a second offence within five years time, you could face an additional £30,000. In extreme cases, non-compliant landlords could be taken to court.
Your decision to work outside the parameters of the ban will follow you and could compromise your reputation.
Any landlords or letting agents committing an offence or receiving more than two financial penalties in one year will be added to a database for rogue landlords and agents. Consider yourself blacklisted in the housing market.
Following 1 June 2020, all landlords and letting agents will be required to follow the parameters of the Tenant Fee Ban, regardless of how many properties you own or manage.
The Best Letting Agents Obey the Laws and Provide Reliable Services
The relationship between landlords and tenants is a professional but deeply personal one.
Landlords are responsible for giving their tenants a safe place to live at a reasonable price. They’re also the contact person for any issues or complaints. Many tenants trust their landlords, which is why the Tenant Fee Ban act is so important.
This act helps create a transparent relationship between landlords and their tenants. This leads to a deeper level of trust and an on-going positive relationship.
Landlords and letting agent who choose to disobey these laws (or any others related to the letting process) are at risk of tarnishing their reputation and losing business both now and well into the future.
Tenant fee ban FAQ
What letting agent fees are banned?
Third-party fees Check-out fees, viewing/showing fees, fees associated with setting up or renewing the tenancy, inventory, referencing, and credit checks.
How do letting agent fees work?
There are two types of letting agent fees. Those that are charges to landlords and those that are charged to tenants. Landlords need to pay for the agent to manage their property. These costs are either fixed or a % of the monthly rent. Tenants are charged fees based on damage to the property, bills, late rent payment charges. In 2019 a substantial amount of tenant fees were banned.
What fees can letting agents charge?
Tenants can still be charged for: A refundable holding deposit, payments that change the tenancy but are requested by the tenant, payments for utilities: council tax, TV licence, and communication services, Payments for early termination of the tenancy if requested by the tenant, a refundable tenancy deposit, a default fee for late payment of rent or lost key or security device and cleaning fees when there’s extensive damage.
How to avoid letting agent fees?
Landlords can avoid letting agent fees by managing the property themselves. This will include finding their own tenants, managing activities such as rent collection, tenancy updates & conducting their own inspections and making their own repairs. Tenants can avoid fees by paying rent on time, looking after the property & not causing damage and staying in the property for the initial term agreed.