On 12th February 2019 the Tenant Fees Act was passed into law by the UK Government. This new act revealed that from 1st June 2019 all new and renewed tenancies will come under the scope of the new ban, whilst existing tenancies will be brought under the new rules from 1st June 2020.

The ban applies to Assured Shorthold Tenancies and Licenses to Occupy only. Non-Housing Act Tenancies such as Common Law Tenancies are not affected.

As a Landlord, it’s important to understand what the Tenant Fees Act means, and how it will affect your income as a Landlord.

There is already a raft of information on the Government website and the Association of Residential Letting Agents (ARLA) website, explaining how to prepare for the Tenant Fees Act, but we have broken down the information available into a more easily digestible format, to give you a clear understanding of what changes will be taking place.

As ever, our qualified staff are fully up to speed with the new regulations, so if you have any questions whatsoever, please don’t hesitate to pick up the phone and contact one of our lettings experts.

KEY MEASURES OF THE TENANT FEES ACT:

HOLDING DEPOSIT/RESERVATION FEE

This is a sum of money paid by a prospective Tenant to a Landlord or Letting Agent in order to reserve a rental property before the signing of a Tenancy Agreement.

Holding Deposit/Reservation Fee can be held for a maximum of 14 days from the date the initial offer is first accepted. After 14 days, unless all contractual documents are complete and initial monies have been received in cleared funds by the Landlord or Letting Agent, the Holding Deposit/Reservation Fee must be refunded.

This highlights the need for all Landlords and Tenants to be ready to go with all safety and contractual documents as well as the initial monies, at the point of the Holding Deposit/Reservation Fee being received.

At Curchods we will be working with our Landlords and Tenants to ensure that strict timescales are being adhered to smooth the process for all parties.

SECURITY DEPOSIT

A sum of money that a Tenant agrees to pay to a Landlord before taking possession of and moving into a rental property.

As of the 1st June 2019, the maximum security deposit amount will be capped at five weeks’ rent. Should the rent exceed £50,000 per annum, then the deposit will be increased to six weeks’ rent.

TENANCY RENEWALS

Any Tenancy that renews/extends after the 1st June 2019 will be subject to apportionment of the existing deposit. Therefore upon renewing or extending an agreement, the appropriate refund will need to be provided to the Tenant, therefore bringing their held security deposit in-line with the new legislation and thus complying with the 2019 Tenant Fee Ban.

PET DEPOSITS

This charge covers any damage that may be caused by a Tenant’s pet(s) while residing in the property.

Landlords can no longer issue a separate charge for a ‘pet deposit’, but they can charge higher rent for Tenants with a pet. Landlords will be obliged to include notice of this higher rent in the particulars of the property advert so it is clear to prospective Tenants.

INVENTORY CHECKS

 The creation of a before and after picture of the rental property. It is an in-depth report which details the contents of the property and every aspect of its condition. 

Inventory Check In/Check Out services are now deemed as fees and as such are no longer permitted. Therefore as of the 1st June 2019, Tenants will no longer be liable to pay the Check Out fee; this will instead fall with the Landlord.

Any existing Tenancy started before the 1st June 2019 will not be affected by this unless the Tenancy renews/extends after 1st June 2019. Any Tenancy starting before the 1st June 2019 and ending prior to the 1st June 2020 remains part of the transition phase of the 2019 Tenant Fee Ban, meaning fees can still be charged retrospectively.

Should your Tenants renew/extend after the 1st June 2019, at the point that either party serves notice to end the Tenancy, the Landlord will be required to transfer the monetary amount to the Tenant. If using a Letting Agent to collect the monthly rent, they will reserve this amount and organise a refund to the Tenant on your behalf.

OVERDUE RENT PAYMENTS

When a Tenant fails to pay the rent on time and falls into arrears with the rental payments for the property they occupy.

Where the rent is overdue by 14 days or more, the Landlord reserves the right to charge interest of up to 3% per day until the rent payments are bought up-to-date. This can be applied from day 15, with the interest being backdated to the first day the tenant fell into arrears if the account is not settled within the 14 day period.

For the avoidance of any doubt, interest cannot be charged if the account is settled and bought up-to-date within the 14 day period.

PLEASE NOTE: It is 14 calendar days and not 14 working days.

SECURITY CHARGES

Should any key or security devise need to be replaced during or at the end of the Tenancy, the Tenant is responsible for all reasonable costs incurred by the Landlord/Letting Agent for a replacement key/security device.

UTILITY BILLS

As per current Tenancy Agreements, the Tenant remains responsible for paying the utilities supplying the property such as Gas, Electricity, Water, Council Tax, Phone and Internet, Television Licences and Television subscription services such as, but not limited to, Sky and Virgin Media.

EARLY TERMINATION

Where written agreement has been given by the Landlord and subject to either the rent being paid up until a new Tenant is secured or until the natural end of the Tenancy, whichever is sooner, early release can be granted.

The Tenant must also pay £230 + VAT (£276 inclusive of VAT) which is the administrative costs incurred by the Landlord to enter into a new Tenancy.

MAINTENANCE

Things to be aware of….

Under the ban, Landlords and Letting Agents cannot require Tenants to pay for the services of a third party. For example, this would include chimney sweeping services and contractors assigned to clean the gutters at the end of the Tenancy.

Regardless of whether this is done at the start of the Tenancy, it is seen as a requirement of the Landlord to ensure that items such as this are in perfect working order for the Tenants exclusive use and therefore under the ban, Landlords have to pay the cost of maintaining such items.

Landlords and Letting Agents are unable to recharge Tenants for contractor invoices even if the invoice states that damage was likely to be caused by Tenant misuse or neglect. This will need to be paid by the Landlord who can then look to claim this back at the end of the Tenancy from the Tenants Security Deposit.