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Renting Advice   |   May 1, 2019

Tenant Fee Ban: Know Your Rights!

Save money on your next rental with the tenant fee ban

Great news! As of 1st June 2019, renters will no longer be required to pay admin fees to agents or landlords. Often referred to as "agency fees", "tenant fees" or "admin fees", these payments have been banned by The Tenant Fees Act 2019 - wahooo!

But what does this mean for renters? Is it really as black and white as it seems? If you're wondering "what fees will I still need to pay?" or better still, "how much will I save?" then you've come to the right place. Here's the Movebubble lowdown on The Tenant Fee Ban, to make sure renters in the UK know their rights ✊

What is The Tenant Fees Act 2019?

Basically, it means that agents and landlords have been banned from charging tenant fees to renters, and there will also be a cap on tenancy deposits. 

Landlords and Agents must not require renters to pay fees when they move into a new property to rent. This includes Assured Shorthold Tenancies (“ASTs”), student accommodation and licenses to occupy housing in England, to make sure that renters of houses in multiple occupation (“HMOs”) also cannot be charged fees.

 

How Much Could I Save?

There are various sources of truth out there, but we reckon that these fees used to cost between £100 and £500 per new tenancy... more than enough cash to save for your housewarming party, we think! 🍸 

The most common fee that agents used to charge was called an "administration fee". It would average around £315 per tenancy! Other fees included "agency fees", "tenant fees" and "early termination fees", ranging from an average of £300 - £377.* (*Source: lettingfees.co.uk, as March 15, 2017)

Renters could save on average £315 per tenancy, with the new Tenant Fees Act 2019.

Another source, Shelter, argues that the average fees are much higher than this, and one in seven renters were charged more than £500!

 

Renters Moving in After 1st June 2019

So, you're moving in to a new rental home after 1st June 2019. What do you need to know about the Tenant Fees Act? 

Holding Fees and Security Deposits

  • The holding fee or holding deposit will be capped at no more than 1 week's rent. This fee is paid when your offer is accepted, and will be deducted from your first month's rent.
  • Deposits cannot be more than the equivalent of 5 weeks rent. Use our handy calculator below to check out the maximum deposit the agent can charge
  • If your annual rent would exceed £50,000 (approx £4,167 per month for 12 months), then the deposit cap would increase to the equivalent of 6 weeks rent
 

Deposit Protection Schemes

Any security deposit or tenancy deposit that a landlord or agent requests for an assured shorthold tenancy, must be protected in one of the three Government backed tenancy deposit schemes within 30 days of them taking the payment.

Will My Holding Fee Be Refunded If I Don't Move In?

A landlord or agent must refund the holding deposit if:

  • The tenant signs a tenancy agreement with them
  • If they decide to pull out of the arrangement with the tenant
  • If they fail to enter a tenancy agreement before the agreed deadline (usually 15 days from the date of the holding fee payment, unless another timeline is agreed in writing) 

A landlord or agent can keep the holding deposit if:

  • You fail the right to rent check
  • You withdraw from the application process
  • The landlord and agent take all reasonable steps to enter the tenancy but the renter does not
  • The details you provide to the agent or landlord is false or misleading information. For example: False income declaration, if you lie about your employment status, if you fail to disclose relevant information such as a valid CCJ

"There are some situations where it is lawful for the agent or landlord to retain your holding fee."

Renters in Existing Assured Shorthold Tenancy Agreements 

In terms of ongoing costs, as of 1st June 2019, agents and landlords will only be allowed to charge renters fees for:

  • A change or early termination of a contract if requested by the renter
  • Utilities, communication services and Council Tax
  • Payments arising from a default (missed rent payment) by the renter 
  • If the agent or landlord has to replace keys or a respective security device
  • Late rent payment charges (which cannot exceed 3% above the bank of England base rate)

These fees must not exceed the landlord or agent’s reasonable costs incurred, and must be put in writing to you.

Changes to Existing Rental Contracts

The fees agents and landlords can charge you to change or update your existing tenancy agreement (Assignment, Novation or Variation) will be capped at a maximum of £50, unless the landlord can prove that greater costs were incurred in the process. But what do these 3 types of changes mean?

  • Assignment: When a person, the assignor, transfers rights, obligations or benefits to another, the assignee. For example, where a new tenant takes the place of another in a flat share arrangement
  • Novation: Different from assignment, involving the creation of a new contract and requires consent of all parties
  • Variation: The act of changing or adapting an existing contract

Leaving Your Tenancy Early

If you need or want to leave before the end of your tenancy, a landlord or agent can charge an early termination fee, which must not exceed the loss they have suffered from you leaving early. This usually means that they cannot charge any more than the rent they would have received before tenancy reaches its end, not the total time it takes to re-let the property.

 

 

Are There Any Exceptions to the Tenant Fees Act?

Agents are not allowed to charge fees if they work for the landlord. However, a relocation agent that finds a property for a renter, but does not work directly for landlords (for any property) can charge the tenant fees for assisting in the search, and the services provided.

 

Things to Look Out For

Your rent should be paid at regular and specified intervals. Agents are not permitted to work around the fee ban by charging a higher amount on your first month's rent!

"For example, if a landlord or agent requires a tenant to pay £800 in month one, and £500 in month two onwards, the surplus of £300 in month one will be a prohibited payment."

Agent and landlords also cannot charge the full amount for holding fees or deposits multiple times to each tenant. The total holding fee and total deposit should be split equally between all tenants who are moving in.

For example: If there are three renters moving in, paying a weekly rent of £240, the landlord or agent cannot ask each renter to pay a deposit of five times the total weekly rent: (5 x 240 = £1200)

 

Potential Effects of the Tenant Fee Ban

In 2011, Scotland also tightened up it's laws on tenant fees, and is a great example to look at, to see how we think the fee ban might affect renters in England.

The Private Rented Housing Act of 2011 (Scotland) – confirmed that only rent and deposit was owed by the tenant, everything else was to be charged to the landlord.

So What Do We Think Could Happen?

Of course, agents and landlords will need to recoup these costs from somewhere. For many agents, these fees were providing around one fifth of their revenue. The most likely outcome will be that agents pass on these costs to their landlords, by increasing the amount they charge landlords in fees to let and manage their properties. But what happens next in the chain? We could make an educated guess that landlords will look to increase rental prices to cover their costs... so in the end, does it really benefit renters at all?

Looking further ahead, it seems that renters who need to move more frequently will be the winners here. They'll enjoy a saving overall, and more flexibility to live where they want to. However, renters such as families who often have longer tenancies may ultimately see a loss overall. 

Below is some research from The Council for Mortgage Lenders, exploring what landlords may do to cope with the increase in agency fees:

How will landlords cope if their cash-flow is affected by the tenant fee ban

 

What is the Punishment for Agents and Landlords Who Do Not Follow the New Rules?

Well, it's not good news for agents and landlords who want to be naughty and try to continue to charge fees. Any breach of the fees ban will be classed as a civil offence, and agents or landlords will be changed a £5,000 penalty fee.

If the agent or landlord continues to ignore the new rules and is caught again within 5 years, it will be classed as a criminal offence, with a larger penalty. 

 

Can I Claim Back Fees I've Paid Recently?

Unfortunately no. The ban on tenant fees will apply to all new tenancies signed on or after 1st June 2019. But don't worry! On the Movebubble app you can search by 'Zero Admin Fees' to find super awesome agents who are embracing this change ahead of time. 

 

Need More Detail? 

No problem, visit legislation.gov.uk for allllllll the details you'll ever need!

 

Share Your Thoughts!

If you're experiencing changes (for better or worse) from the Tenant Fees Act, then shout about it in the comments below 🙌

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