The Tenant Fees Act bans most letting agent fees charged to tenants. From 31st May 2020 this legislation applies to all tenancies, including those signed before 1st June 2019 when the act first became law.

Here we look at what the fee ban means for landlords, letting agents and tenants.

What are letting agent fees for?

The reason for letting fees is supposed to be to cover the costs of:

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  • Taking credit checks
  • Taking references
  • Administrative charges for the rental contract
  • Check-in and check-out charges

Letting agent fees charged to tenants typically averaged around £350, but a small minority of letting agents were inflating the costs to increase their profits. The government implemented the tenant fee ban to improve transparency.

The Tenant Fees Act 2019

The aim of the Tenant Fees Act is to reduce the costs that tenants need to pay upfront and enable renters to easily see what a property will cost them in rent, without any hidden costs.

The landlord is responsible for paying for these services, which will ensure that letting agents charge the real cost of the services provided as they compete for landlord’s business.

What can landlords and letting agents charge for?

Under the Tenant Fees Act, the only payments that landlords and letting agents can charge are:

  • rent, the Tenant Fees Act does not permit charging a higher rent for the first part of the tenancy, so landlords cannot disguise extra fees by charging more for the first months rent
  • a refundable holding deposit (to reserve a property) capped at 1 week’s rent
  • a refundable tenancy deposit capped at 5 weeks’ rent (or 6 weeks’ rent on properties with an annual rent of £50,000 or above)
  • costs of early termination of the tenancy agreement at the request of the tenant, charges can be equivalent to the loss of rent only
  • changes to the tenancy agreement at the request of the tenant, capped at £50 (or reasonably incurred costs, if higher)
  • payments in respect of utilities, communication services, TV licence and Council Tax if the landlord pays these, limited to the cost paid to the supplier
  • replacement of lost keys, limited to the actual cost of key cutting
  • interest on late rent payments charged at 3% above the Bank of England base rate

what fees can landlords charge?The impact of the ban on landlords and letting agents

The ban on letting fees will mean tenants receive the same service at a lower cost. Instead, landlords will be accountable for all the costs of renting out their property.

Most letting agents have increased the fees they charge to landlords to cover the reasonable costs of credit and reference checks, preparing the tenancy agreement, inventory and check-in and check-out administrative expenses. Because the lettings industry is highly competitive, lettings agents are unable to charge inflated fees.

For landlords, the real fee increase will vary but is generally relatively small. For example, a landlord whose fees increased by 1% on their property rented out for £2,000 per month will be paying an extra £20 per month.

Some landlords may have sought to recoup their additional costs by increasing the rent. However, rent is set by a combination of what other landlords are charging for similar properties and what tenants are prepared to pay to live in the area. Therefore, rent increases are only likely in areas where demand for rental accommodation outstrips supply.

If you’ve been charged a banned fee

If you think you have been charged a banned fee, you should raise this with you letting agent or landlord. They should show you why they are entitled to make this charge or refund you if a mistake has been made.

Local authorities (usually trading standards) are responsible for enforcing the ban so you can report the letting agent or landlord to them, you can find your trading standards office on gov.uk. You can also get assistance from Citizens Advice.

All letting agents must belong to a government-approved redress scheme, either The Property Ombudsman (TPO) or The Property Redress Scheme, who will investigate your complaints.

M&M Property are committed to excellent customer service for both our landlords and tenants. If you’d like to hear more about our service for landlords, or are looking for property to rent in Islington, Stoke Newington, Highbury, or Newington Green, please get in touch.