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Letting fees to be banned from 1st June 2019

29 January 2019

Emma Cornell

letting fees

Many landlords use letting agents to manage their properties.  It eases the burden on a landlord and can make sure that the landlords legal requirements are met.  However, letting agents do sometimes pass fees onto the tenants for their services.  This can mean that tenants are met with costs that for some they struggle to meet the cost of.  If they are not clearly explained residents may unaware of the true costs of renting a property.

In light of this, Landlords and letting agents in England are set to be banned from charging tenants letting fees from 1st June 2019.  The Tenant Fees Bill is expected to become an Act of Parliament and will bring an end to some letting fees and according to government figures it saves tenants around £240 million a year.  This does mean that if the costs are still to be charged by the letting agents that they will have to met by the landlord.  There is of course a risk that landlord may seek to increase the rent charged to tenants to cover these costs.

The new Rules from 1 June 2019:

The only costs landlords and agents will be able to charge tenants for will be:

-Rent.

-Utilities and council tax if included within the tenancy.

-A refundable deposit, capped at six weeks’ rent. The cap could be five weeks’ rent for properties where the annual rent is less than £50,000, under an amendment put forward in the House of Lords.

-A refundable holding deposit to reserve the property, capped at one week’s rent.

-Changes to the tenancy requested by the tenant, capped at £50 (or “reasonable costs”).

-Early termination of the tenancy requested by the tenant.

-Defaults by the tenant, such as fines for late rent payments or lost keys. These must be “reasonable costs”, with evidence given in writing by the landlord or agent.

In addition to this it is expected to amend the Consumer Rights Act 2015 in relation to the information that should be given to tenants.

What is the penalty for failure to comply:

Landlords or agents found charging the fees could be fined or subject to criminal sanctions. A civil offence could have a financial penalty  of up to £5,000, but if a breach is committed within 5 years of the imposition of a financial penalty or conviction for a previous breach this will be a criminal offence. The penalty for the criminal offence could be an unlimited fine.  Where an offence is committed, local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution. In such a case, local authorities will have the discretion about whether to prosecute or impose a financial penalty.   A breach of the requirement to repay a holding deposit could be subject to a financial penalty of £5,000.  Local authorities will also be able to retain the money raised through the financial penalties for future local housing enforcement.

Landlords have a number of obligations that they must comply with.  Failure to comply with them can lead to other penalties such as difficulties in gaining back possession of a property, paying damages to a tenant, fines and even criminal sanctions.  It is therefore imperative that any landlord before they enter into a tenancy agreement with a tenant seeks full advice on their duties.  The role of a landlord does not cease when a tenant has moved into a property. Even if they currently have a tenant in a property, landlords should make sure that they keep up to date with the latest requirements as they could still be in breach by not complying with legal requirements and obligations.

If you would like more information about the issues highlighted in the article above or expert litigation advice, please do not hesitate to contact Emma Cornell, Head of the Disputes Resolution team, on 01302 965250 or alternatively you can email emma.c@taylorbracewell.co.uk