Letting agents have been issued with a warning to review tenancy agreements already in place, in order to ensure they are fit for use before the ban on fees takes effect from June 2019. In particular, by completing a review, agents could potentially minimise the impact of the Bill on Section 21 notices.
Andrew Turner, Chief Executive at Commercial Trust Limited, a specialist buy-to-let brokerage, issued the warning. He explained that although the ban will primarily only apply to new tenancies and tenancy renewals, while also excluding periodic and statutory tenancies from 1st June, the ban on fees looks likely to be applicable to existing tenancies in June 2020.
From this date, any clause within the agreement which permits the outlawed charges will become ineffectual. Mr Turner emphasised that this is crucial information in the circumstances of Section 21. After 1st June, any agent or landlord that charges a banned fee will have to return this to the within 28 days. Failure to do this would render any Section 21 notice ineffective, and would be treated as unlawful.
It is also important to note that these new rules will only apply to student accommodation, assured shorthold tenancies and licences. Andrew Turner also emphasised that it is vital for letting agents and landlords to fully understand the significance of the Tenants Fee Bill in connection with Section 21 and affected tenancy agreements. He went on to state that it is worth spending time reviewing existing templates and tenancy agreements to ensure that they are still suitable after 1st June.
From this date, it will become illegal to charge fees for a wide range of services which letting agents and landlords presently charge for. Fees that will be banned include gardening provisions, requirements for insurance from specific providers, administration costs, flea treatment for the property as a condition for allowing pets and professional cleaning charges. In addition, fees for taking up references, domestic cleaning, inventory checks, credit checking and for guarantor forms will also become unlawful.
However, there are some charges for fees which will be excluded from the ban. These include charges relating to contractual defaults, deposits, rent and holding deposits.
Mr Turner goes on to state that moving forward, it would be best practice for letting agents and landlords to ensure that all future tenancy agreements will not mention any of these banned charges. However, there may be some potential issues concerning tenancy agreements in effect currently, which could include clauses which allow some of the banned fees to still be charged.
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