Following a long legislative process, the Tenant Fees Act 2019 (“Act”) received Royal Assent on 12 February 2019 following its introduction as the Tenant Fees Bill in May 2018.
From 1 June 2019, all new and renewed tenancies will fall within the scope of the Act. All existing tenancies will be caught by the Act from 1 June 2020.
The purpose of the Act is to reduce the number of costs tenants face when renting a property.
The government believes that the introduction of the Act will save tenants in England £240m or £70 per household.
What does this mean?
The Act applies to both landlords and letting agents.
The Act essentially bans “unfair” letting fees such as credit check and reference fees and caps tenancy deposits at 5 weeks’ rent. However, where rent is more than £50,000 a year, the cap on deposits remain at 6 weeks’ rent.
The maximum that landlords can charge for a change in tenancy is £50.
The introduction of the Act no doubt increases costs for landlords. Landlords who breach the requirements contained within the Act for the first time will be hit with a £5,000 fine.
Where the tenants historically have met these costs, examples of the only costs the tenants will now be liable for are:
- Utility bills
- Council tax
- Any refundable deposits
- Default charges such as losing keys
- Early termination of the tenancy when requested by the tenants
- Certain default fees pursuant to the tenancy agreements
The Act also deals with holding deposits and damages in respect of breaches of the tenancy.
Affect on rent
Given that landlords will now have to pay costs which were previously passed onto the tenant, we are likely to see landlords increasing rent to offset these costs. There is no restrictions within the Act for landlords to charge a higher rent so long as it is consistent throughout the tenancy. However, there is a restriction preventing landlords setting an initial higher rent to offset these costs at the beginning of a tenancy, followed by a reduction in rent afterwards.
Whether we like it or not, the Act is here to stay.
The government will shortly be publishing guidance for landlords, tenants and letting agents to explain how the Act will affect them.
If you are a landlord, tenant or a letting agent and you require expert legal advice, please do not hesitate to contact a member of the Dispute Resolution team at Fraser Brown.