by Jen Lemen
Hot Topic Highlight - Residential Tenant Letting Fee Ban
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Property Elite’s sole aim is to build better property professionals - supporting your career every step of the way, whether you are completing a RICS accredited degree course, your RICS APC/AssocRICS or simply seeking engaging CPD.
This week, we will be looking at the residential tenant letting fee ban which will be essential knowledge for a wide variety of RICS AssocRICS and APC candidates.
If you are planning to sit your RICS APC/AssocRICS this Spring, you'll want to have your preparation well under way this month. We've got lots of candidates already signed up to support their Spring 2019 submissions - in our experience, the earlier you seek additional support, the better chance you have of RICS APC success!
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What's new and from when?
The Tenant Fees Act 2019 received Royal Assent on 12 February 2019. The new legislation will come into force on 1 June 2019. Proposals had been discussed by the Government since 2016.
Why was the new legislation needed?
The Government considered that new legislation was needed to resolve the problem of affordability for residential private rented tenants, who totalled 4.7m households in 2016/17.
This primarily related to letting fees and high deposits, which the Government considered to lack transparency or be disproportionate to the level of service provided. According to Citizens Advice, the average 'administrative fee' paid by tenants is £400.
Who does the legislation apply to?
Both landlords and agents in England.
What does the legislation apply to?
Renewals of tenancies initially. After 12 months, it will also apply to existing tenancies. If a prohibited payment is taken after this time, the landlord or agent will have 28 days to return the payment to avoid breaching the new legislation.
What are the key changes?
Landlords and agents will no longer be able to charge their tenants fees for tenancies signed on or after 1 June 2019. These costs will need to be met by the landlord. If a landlord has not repaid any unlawfully charged fees, they will not be able to recover possession of their property using a Section 21 notice.
Examples of fees which will be banned include:
- Credit checks
- Administrative charges
- Charging for a guarantor form
Fees which can still be charged, but are subject to caps include:
- Security deposits, capped at 5 weeks' rent (unless the annual rent exceeds £50,000, where the cap is increased to 6 weeks' rent)
- Holding deposits, capped at 1 weeks' rent and subject to a repayment clause
- Tenancy changes or early termination requested by the tenant capped at £50 or 'reasonable costs' confirmed in writing with supporting evidence
- Tenant defaults, e.g. lost keys or late rent payment penalties (not exceeding 3% above the Bank of England base rent)
- Rent, utilities and Council Tax
The Consumer Rights Act 2015 is also being amended to apply transparency requirements to online portals such as Rightmove and Zoopla.
What are the penalties for non-compliance?
£5,000 for an initial breach, with a criminal offence where a landlord or agent has been fined or convicted of the same offence within the preceding 5 years. As an alternative to prosecution, penalties up to £30,000 can be issued.
How can tenants challenge unreasonable fees?
Trading Standards will enforce the ban, with the First-tier Tribunal presiding over disputed fee cases.
Is there any further guidance available?
As of March 2019, the Government and RICS have not yet published guidance for landlords and agents on how to comply with the legislation. When this is published, we will comment upon it in a future blog article - stay tuned!
How can we help?
- Sign up for a complimentary copy of our Ebook Guide to the APC (UK and MENA editions)/AssocRICS/Senior Professional Route/FRICS, together with our updated APC Hot Topic Guide - full of even more helpful advice and tips to pass your RICS APC or AssocRICS with flying colours first time
- Sign up for our bespoke support services, such as our final assessment review & feedback service, RICS APC question packs (around 1,000 questions/30 pages based on your submission), e-mock interviews and revision quizzes. Don't forget that we offer some great value discounted packages if you purchase more than one support service
- If you're confused about anything, just contact us on 07804 642 825 / firstname.lastname@example.org. We offer all candidates a free & friendly 30 minute RICS APC consultation
Not sure about signing up? You can read what some of our recent successful candidates have to say here.
Stay tuned for our next blog post to help build a better you
N.b. nothing in this article constitutes legal or financial advice.