New Tenant Fees Act comes into effect

As of Saturday 1 June, the Tenant Fees Act (English letting fees ban) is now in effect, following the successful passing earlier this year of the Tenant Fees Bill.

RICS welcomes any attempt to improve standards and consumer outcomes, however it must be done in a proportionate way.

The new legislation is not a banning of fees outright, but represents a shift from tenants to landlords: the burden of fees being put onto the party with the choice of agent, or onto the agents themselves if they chose to absorb the fees on behalf of clients.

The aim of this switch of burden to those making the choice it is hoped should create a better market with more competition. This represents a subtle change of emphasis which now defines the agents’ customer as the landlord rather than the tenant, with fees now hopefully seen as business expenses either at the landlord or agent level.

It does not mean, however, that on-costs will completely disappear from tenants. There is a possibility that landlords will pass the fee on through rental elements. An increase in the landlords’ costs could easily be absorbed into the rent. The financial burden is, however, taken off the tenant upfront, at a time when they have abnormal costs to cover such as having to pay a new deposit before they have received back their previous deposit. It also potentially improves transparency for the tenant at the outset.

The only fees, apart from the rent, that can be charged are:

• a refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above
• a refundable holding deposit (to reserve a property) capped at no more than one week’s rent
• payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher
• payments associated with early termination of the tenancy, when requested by the tenant
• payments in respect of utilities, communication services, TV licence and council tax
• a default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement.

Trading standards authorities have a duty to enforce the ban, however district councils that are not trading standards authorities will also have the power to enforce if they choose to do so, with guidance stating: “If the fee you are charging is not on this list, it is a prohibited payment and you should not charge it. A prohibited payment is a payment outlawed under the ban. If you are uncertain as to whether a charge is permitted, you should consider contacting Citizens Advice or obtaining legal advice. You could contact your local trading standards authority or the lead enforcement authority.”

The guidance also says: “You cannot evict a tenant using the section 21 eviction procedure until you have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit. All other rules around the application of the section 21 evictions procedure will continue to apply.”

The guidance does not stipulate how the payment of prohibited fees will affect eviction under a new s8 process as part of the government’s ambition to overhaul the eviction processes.

RICS would now encourage the government to update their recently released How to Rent and How to Let guides which are now both outdated in terms of fees.